Section 15 – Actual salary received after deduction of notice period pay, as per agreement with the employer, is taxable in the hands of the employee.

7.  [2017] 80
taxmann.com 297 (Ahmedabad – Trib.)

Nandinho Rebello vs. DCIT

ITA No.: 2378 (Ahd) of 2013

A.Y.: 2010-11    Date
of Order: 18^th April, 2017

FACTS

The assessee, an individual, deriving income chargeable under
the head salaries, house property and other sources, filed his return of income
on 16.3.2011 declaring total income of Rs. 11,45,880. Subsequently, on
4.7.2012, the Assessing Officer (AO) issued a notice u/s.148 of the Act on the
ground that the assessee has not disclosed salary received from his previous
two employers viz. Videocon Tele Communication Ltd. and Reliance Communication
Ltd.

The details of employment of the assessee, during the
previous year and also amount of salary due to him and notice pay recovered
from his salary were as under-

The AO noted that the assessee has declared salary income of
Rs. 11,45,880 received by him from Sistema Shyam Teleservices Ltd. The
allegedly undisclosed salary income of Rs. 1,64,636 received from Reliance
Communication Ltd. and Rs. 5,46,000 received from Videocon Tele Communications
Ltd. was added to the returned income declared by the assessee.

Aggrieved, the assessee preferred an appeal to the CIT(A) who
upheld the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal noted that the amount of notice pay of Rs.
2,76,744 was claimed by the assessee in the return of income as deduction which
was recovered from the salary by the assessee’s previous employers. It observed
that the CIT(A) was of the view that no such deduction is available u/s. 16 of
the Act and the salary income is taxable on due basis or on paid basis. The
Tribunal held that the employers have made deduction from the salary which was
paid to the assessee during the year under consideration because of leaving the
services as per agreement made by the assessee and the respective employer. It
observed that this is a case of recovery of the salary which is already made to
the assessee for which reference to section 16 of the Act is not required.  It observed that the assessee has actually
received the salary from his previous employers after deducting the notice
period as per the job agreement with them. The Tribunal held that the actual
salary received by the assessee is only taxable.

The appeal filed by the assessee was allowed.