G S RATRA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to us by the Income-tax Appellate Tribunal ("the Tribunal" for short), under Section 256(1) of the Income-tax Act, 1961 ("the Act" for short), as fashioned by the Tribunal, reads as under :

(2.) SHORTLY put, the necessary facts leading up to the present reference by the Tribunal are that the assessee was employed with Oriental Power Cables Ltd., Kota, from the month of July, 1962, as Chief Engineer of the said company. In the year 1965, the management of the said company was changed and the new management appointed three more persons in a position superior to that of the assessee. Therefore, he was relegated to the fourth position in the company, thereby causing considerable reduction in status and power. It is the case of the assessee that as a result, he felt humiliated and insulted and underwent considerable mental agony. Therefore, he preferred to resign from the company and he did so with effect from July 27, 1967. The assessee joined M/s. Sriram Fertilisers Corporation of India on the next day, i. e., July 28, 1967, on emoluments which were better than what he was drawing earlier. The period of his service with M/s. Oriental Power Cables Ltd., Kota, was less than five years. During the aforesaid period, the assessee accumulated a balance in his provident fund to the extent of Rs. 28,217, which he received after his resignation from the said company. The question arose whether the aforesaid accumulated balance received by the assessee was assessable in his hands in terms of Rule 8 of Part A of the Fourth Schedule to the Income-tax Act, 1961, as his income from salary. According to the Revenue, the amount was assessable in the hands of the assessee. On the other hand, the assessee claimed the same to be exempt from income-tax. Since the assessee had rendered continuous service with the employer for a period less than five years, the Income-tax Officer, considering the provisions of Rule 8 of Part A of the Fourth Schedule to the Income-tax Act, 1961, included the same in the total income of the assessee. This rule reads as under :

(3.) SHRI Surolia, learned counsel for the Department, submitted that the notion of resignation is distinct and separate from the notion of termination of service. Therefore, the expression "service has been terminated" in Clause (ii) of Rule 8 would not take in its ambit the notion of resignation.