1984 (3) TMI 136 - AT - Income Tax

Retired employee denied exemption under Wealth-tax Act for provident fund post-retirement.

Wealth-Tax Officer/Income-Tax Officer And Another. Versus Smt. Manorama Devi Birla.

The Tribunal held that the retired employee was not entitled to exemption under section 5(1)(xvii) of the Wealth-tax Act for the assessment year 1977-78 ... Provident Fund, Valuation Date Issues:1. Whether the amount deposited in the provident fund account of the assessee after retirement is liable to wealth tax.2. Whether the exemption under section 5(1)(xvii) of the Wealth-tax Act, 1957 is applicable to the assessee who retired from service before the relevant valuation date.Detailed Analysis:Issue 1:The appeals filed by the department for the assessment years 1975-76, 1976-77, and 1977-78 were consolidated and heard together. The assessee, a retired employee of Birla Gwalior (P.) Ltd., had a deposit in the provident fund account. The Wealth Tax Officer (WTO) included this amount in the net wealth of the assessee for the assessment year 1977-78, considering it ceased to be provident fund money after retirement. The Commissioner (Appeals) later excluded this amount from the total wealth of the assessee. The department contended that the delay in refunding the amount cannot be attributed to the assessee, and the delay should not be used to claim exemption under section 5(1)(xvii) of the Act.Issue 2:For the assessment year 1977-78, the department argued that the exemption under section 5(1)(xvii) is only available to a salaried employee still in service on the valuation date. The departmental representative emphasized that the benefit of exemption is lost after retirement. On the contrary, the assessee's representative argued that the amount in the provident fund account retained its character even after retirement, and thus, should be exempt from wealth tax. The departmental representative further contended that the assessee cannot claim exemption based on the delay in receiving the provident fund amount.The Tribunal analyzed the provisions of the Wealth-tax Act, specifically section 5(1)(xvii), which exempts the amount in a provident fund maintained by the employer for a salaried employee. The Tribunal noted that the exemption is available only if the two conditions of the employee being salaried and the fund being maintained by the employer are satisfied simultaneously. In this case, the assessee was no longer an employee on the relevant valuation date, even though the amount remained in the provident fund account. Therefore, the Tribunal concluded that the assessee was not entitled to the exemption under section 5(1)(xvii) as one of the conditions was not met. Consequently, the departmental appeal for the assessment year 1977-78 was allowed, and the order of the Commissioner (Appeals) was set aside.Regarding the appeals for the assessment years 1975-76 and 1976-77, where the department challenged the exclusion of amounts from the total wealth of the assessee, the Tribunal dismissed these appeals as they did not arise from the impugned order passed by the Commissioner (Appeals) for those years.