Case Note & Summary
The case is an income tax reference under section 256 of the Income-tax Act, 1961, arising from the assessment year 1980-81. The assessee, Shri B.K. Kotru, was employed as an Industrial Officer with M/s Sandvik Asia Ltd. He expressed a desire to leave service and sought waiver of the six-month notice period. His resignation was accepted on 7.2.1979, effective from 25.5.1979, and he was permitted to avail earned leave from 2.3.1979 to 24.5.1979. Upon resignation, he received a sum of Rs. 95,000 as leave encashment. The Income Tax Appellate Tribunal referred the question of whether this amount is taxable as a perquisite under section 17(3)(i) read with section 17(1)(iv) of the Act. The court considered the facts and held that the leave encashment received on resignation is a perquisite within the meaning of section 17(3)(i) read with section 17(1)(iv) and is therefore taxable as salary. The court answered the question in the affirmative, in favor of the Revenue.
Headnote
A) Income Tax - Perquisite - Leave Encashment - Section 17(3)(i) r/w Section 17(1)(iv) of the Income-tax Act, 1961 - The assessee, an employee, resigned and received leave encashment of Rs. 95,000. The question was whether this amount is taxable as a perquisite. The court held that leave encashment received on resignation is a perquisite under section 17(3)(i) read with section 17(1)(iv) and is taxable as salary. The court reasoned that the amount was received from the employer in connection with the termination of employment, falling within the definition of perquisite. (Paras 1-2)
Issue of Consideration
Whether the sum of Rs. 95,000 received by the assessee as leave encashment upon resignation is liable to be taxed as a perquisite under section 17(3)(i) read with section 17(1)(iv) of the Income-tax Act, 1961 for the assessment year 1980-81
Final Decision
The court answered the question in the affirmative, holding that the sum of Rs. 95,000 is liable to be taxed as a perquisite under section 17(3)(i) read with section 17(1)(iv) of the Income-tax Act, 1961 for the assessment year 1980-81.
Law Points
- Leave encashment received on resignation is a perquisite under section 17(3)(i) read with section 17(1)(iv) of the Income-tax Act
- 1961
- and is taxable as salary
