1982 (2) TMI 110 - AT - Income Tax

Tribunal Reduces Car Value, Rules on Provident Fund Interest Tax

The Tribunal allowed the appeals, reducing the perquisite value of the car to Rs. 1,200 for both assessment years and ruling that interest credited to the ... Salary, Accretion To Provident Fund Issues Involved:1. Perquisite value of a car kept at the assessee's disposal.2. Inclusion of interest credited to the provident fund in excess of one-third of the salary as taxable income.Issue-Wise Detailed Analysis:1. Perquisite Value of a Car Kept at the Assessee's Disposal:The first point of dispute concerns the perquisite value of a car kept at the assessee's disposal. The Income Tax Officer (ITO) included Rs. 5,400 as the perquisite value for both the assessment years 1977-78 and 1978-79, which was upheld by the Commissioner (Appeals). The assessee appealed further, and the Tribunal noted that a similar issue had arisen for the assessment year 1976-77. The Tribunal had previously determined that Rs. 1,200 could be treated as the perquisite value. Consequently, the Tribunal directed that the figure of Rs. 1,200 be substituted for Rs. 5,400 for both assessment years.2. Inclusion of Interest Credited to the Provident Fund in Excess of One-Third of the Salary as Taxable Income:The second point of contention revolves around the inclusion of interest credited to the provident fund, which exceeded one-third of the salary by Rs. 25,248 for the assessment year 1977-78 and Rs. 35,046 for the assessment year 1978-79. The ITO included these amounts in the assessment. The assessee argued that under rule 6(b) of the Fourth Schedule dealing with recognized provident funds, two conditions must be met for the interest to be treated as income: the interest on the accumulated balance should exceed one-third of the salary, and the rate at which the interest is paid should exceed the official rate. The assessee contended that these conditions are cumulative, not alternative, and thus both must be satisfied for any addition to be made. The Commissioner (Appeals) rejected this submission, stating that the rules did not contain a directive like 'whichever is beneficial to the assessee.'In the further appeal, the assessee reiterated that the two conditions should be construed conjunctively, meaning the word 'or' should be read as 'and.' The department argued that the assessee, having shown these amounts in the return, should not have any grievance and that the wording of the section was plain, not allowing for the interpretation sought by the assessee.The Tribunal referred to Maxwell on The Interpretation of Statutes, which states that 'or' is generally disjunctive but can be read as conjunctive to avoid absurd consequences. The Tribunal also cited the Supreme Court's interpretation in the Mazagaon Dock Ltd. case and the Bombay High Court's decision in Yakub Versey Laljee v. CIT, where 'or' was read conjunctively to avoid absurd results.The Tribunal concluded that the expression 'or' in rule 6(b) should be construed conjunctively. They reasoned that the scheme of the Act aims to encourage savings, and interpreting 'or' disjunctively would lead to absurd consequences, such as small salary employees being taxed on interest credited to their provident funds due to circumstances beyond their control. The Tribunal also noted that the amendment of rule 6(b) in 1981 was intended to clarify the Legislature's original intent.Subsidiary Points:The department argued that the assessee's appeal was not competent because the assessee had not claimed the exemption at the assessment stage. The Tribunal rejected this argument, stating that it is well-settled law that an assessee can claim an exemption before appellate authorities even if it was not claimed initially. The Tribunal also dismissed the department's contention that the absence of expressions like 'whichever is less' in the rules supported their interpretation.Conclusion:The Tribunal allowed the two appeals, directing that the perquisite value of the car be reduced to Rs. 1,200 for both assessment years and that the interest credited to the provident fund exceeding one-third of the salary should not be included as taxable income unless both conditions in rule 6(b) are satisfied.