COMMISSIONER OF INCOME TAX Vs. GOPALAKRISHNA MURTHY B

JUDGEMENT

(1.) IN this reference, made to this court at the instance of the Commissioner of INcome-tax, Andhra Pradesh, Hyderabad, under Section 66(1) of the INdian INcome-tax Act, 1922 (hereinafter referred to as the "Act"), the following question of law arises for our consideration :

(2.) ON his retirement from the Life Insurance Corporation of India, the assessee, Sri B. Gopalakrishna Murthy, in accordance with the Staff Regulations of the Life Insurance Corporation of India, received retirement gratuity of Rs. 11,250 from his employers. The Life Insurance Corporation of India deducted the tax at source on the payment of gratuity made to the assessee and the assessee also returned it for the assessment year 1960-61. The Income-tax Officer accordingly taxed that gratuity. Later on, the assessee realised that the gratuity paid to him by his employer was exempt from payment of tax under the proviso to the second Explanation to Sub-section (1) of Section 7 of the Act and that he by mistake returned it. The assessee, therefore, preferred an appeal against the assessment to the Appellate Assistant Commissioner of Income-tax. The Appellate Assistant Commissioner accepted the contention of the assessee that gratuity was exempt from payment of tax and accordingly deleted it from the total income. Aggrieved by the order of the Appellate Assistant Commissioner, the Income-tax Officer filed an appeal to the Appellate Tribunal. The Tribunal also accepted the view expressed by the Appellate Assistant Commissioner and dismissed the appeal filed by the Income-tax Officer. Hence, this reference has been made by the Commissioner of Income-tax as stated above.

(3.) THE Life Insurance Corporation of India is a corporation which has been established by the Act of the Central Government and that is the " Life Insurance Corporation Act, 1956 ". Payment of gratuity to the assessee is not a solitary and individual payment to the assessee, but it has been made to the assessee under a scheme framed by the Life Insurance Corporation of India for payment of gratuity to its permanent employees. THE regulation defining the terms and conditions of service of the staff have been framed by the Life Insurance Corporation of India with the approval of the Central Government. If the payment of gratuity to the assessee is under a scheme similar to the Revised Liberalised Pension Rules of the Central Government then it is exempt from payment of tax under the proviso to Explanation 2 to Sub-section (1) of Section 7 of the Act. THE scheme under which the Life Insurance Corporation of India has paid the gratuity to the assessee has to be compared with the scheme of the Liberalised Pension Rules of the Central Government, in order to ascertain whether the former scheme is similar to the latter. THE relevant portions of both the schemes are given in the printed book as annexures " B " and " C ".