ORDER
B.S. Saluja, Judicial Member
1. The assessee has filed the appeal against the order of DCIT(A), – Range-I, New Delhi dated 6-2-1992 mainly on the ground that the personal pay granted to the assessee for undergoing Vasectomy operation is exempt under Section 10 and does not fall within the definition of “income” and that the DCIT(A) has wrongly confirmed the disallowance of compulsory deduction from salary towards Provident Fund which deduction has overriding title on the salary.
2. The assessee filed the return of income on 29-4-1988 declaring the net income of Rs. 28,488. In response to notice under Section 143(2) the assessee filed written submissions before the Assessing Officer in support of claims made by him with reference to special pay and certain compulsory deductions made from salary on account of contributions towards CGHS, CGEIS and PF. The Assessing Officer without much discussion on the aforesaid exemption claimed by the assessee, disallowed the amount of Rs. 106 towards contribution to CGHS, Rs. 960 towards contribution to CGEIS, Rs. 1500 as personal pay for undergoing Vasectomy operation and Rs. 3,421 as compulsory deduction @ 6 per cent of salary towards PF.
3. On appeal, the DCIT(A) considered the claims of the assessee for exemption with reference to compulsory deductions towards PF, CGHS and CGEIS in the light of the decision of Hon’ble Supreme Court in the case of State Bank of Travancore v. CIT [1986] 158 ITR 102, as relied upon by the assessee. After detailed analysis of the nature of the compulsory deduction of PF in the light of aforesaid decision, the DCIT(A) observed that “in the facts before me there is a situation like suspended animation where some portion of the appellant’s income is compulsory deduction towards provident fund which will be available to the appellant at his retirement and some percentage of the deposit can be made available to the appellant even before the retirement during the course of service”. With reference to the deductions towards CGEIS, DCIT(A) observed that the same is to provide insurance cover to the appellant and his family members and such deduction cannot be said to be diversion of income of the appellant as they remained deposited in favour of the appellant for his own benefit to meet any contingent liability. Similarly the deduction towards CGHS is to meet any unforeseen contingent liability towards health of the Government employee and his family members and that at times the Government has to incur more expenses on meeting medical expenses of the employee and his family members than the amount which is so deducted. The DCIT(A) thus disallowed any deduction on these amounts. With reference to claim of the assessee for exemption of Rs. 1,500 as personal pay for undergoing Vasectomy operation under Section 10(17A) or Section 10(17B), the DCIT(A) observed that the said provisions pertained to the awards/reward which have been approved by the Central Government for which notifications are issued by the CBDT from time to time after seeking approval of the Government. He further observed that there is no such award for the Vasectomy operation for which notification has been issued by the Board and hence no exemption would be given to the appellant for payment/increment received for Vasectomy operation. Aggrieved, the assessee has filed the present appeal.
4. The assessee, Shri S.N. Bhargava mentioned at the outset that he is not pressing his claims with reference to deductions made from his salary towards CGHS and CGEIS and that he is also not pressing ground Nos. 4 & 5. With reference to personal pay granted to him after undergoing Vasectomy operation, he referred to the provisions of Section 10(1 7A) and (17B), as in force in the assessment year 1988-89 and also office memorandum No. 7(39)-EIII/79 dated 4-12-1979 issued by the Government of India, in the Ministry of Health, placed at page 36 of the paper book. He submitted that the special increment in the form of personal pay as referred in the said office memorandum and granted to Government servants who had undergone Vasectomy operation for the purposes of promoting small family norms, is in the nature of an award/reward and that such award/reward is clearly exempted under the provisions of Section 10(17A) / (17B). In this connection he also referred to the definitions of the words “award” and “reward” as given in Brake’s Law Dictionary, extracts placed at pages 28 to 31 of the paper book and submitted that the meaning of award also includes “to confer as being deserved or merited” as also a prize. Further, the word “prize” has been defined to mean “a reward offered to the person who, among several persons or among the public at large, shall first (or best) perform a certain undertaking or accomplish certain conditions, an award or recompense for some act done, some valuable-thing offered by a person for something done by others”. The word “reward” has been defined to mean “a recompense or premium offered or bestowed by Government or an individual in return for special or extraordinary services to be performed, or for special attainments or achievements, or for some act resulting to the benefit of the public, as a reward for useful inventions, for the discovery and apprehension of criminals, that which is offered or given for some service or attainment, sum of money paid or taken for doing or forbearing to do, some act”. He further submitted that the learned DCIT(A) has misconstrued the said provisions of Section 10 and has wrongly observed that a notification is necessary before an exemption can be allowed under the said provisions. He submitted that the office memorandum in question has been issued by the Central Government and that there is no further need for any approval by the Central Government and that strictly speaking there is no requirement for issuing a notification under the said provisions. He also referred to certain literature place in the paper book wherein it is mentioned that population problem is draining the economy of India and is a hindrance in raising the standard of people and that the small planned family is in public interest. In view of the foregoing he submitted that the personal pay being drawn by him should be declared as exempt under the aforesaid provisions of Section 10. With reference to compulsory deductions of 6% of the salary towards PF, he requested that the Tribunal may kindly admit the same as an additional ground as the same arises out of the order of the learned DCIT(A) and due to typing error the same has not been included in ground No. 3. The learned departmental representative did not object to the admission of the said additional ground. The same is, therefore, allowed to be admitted.
5. The learned counsel relied on the decision of the Hon’ble Supreme Court in the case of State Bank of Travancore (supra) for the proposition that if there is any diversion of income at source under any statute or by overriding title, then there is no income to the assessee and the same does not form part of real income and should be exempt from tax. The learned departmental representative Shri S.C. Gupta submitted that insofar as personal pay granted to the assessee is concerned, the real question is as to whether the same can be treated as an award/reward under the provisions of Section 10, as relied upon by the assessee. He submitted that the object of the aforesaid office memorandum issued by the Ministry Of Health is to promote small family norms amongst the employees of the Central Government and the special increment has been granted as personal pay to the assessee and in terms of the said office memorandum is to be absorbed in future increase in pay of the assessee in the same post or on promotion to higher post. In this connection he also relied on the decision of the Tribunal, Allahabad Bench in the case of WG. CDR. K.P.K. Ghose v. CTO [1983] 5 ITD 413 wherein it has been held that “the exemption under Section 10(17A) is only for those awards which are for literary, scientific or artistic work or attainment or for proficiency in sports and games which are instituted by the Central Government or by the State Government or approved by the Central Government for this purpose. Since there was nothing on record to show that the impugned contest in this case was instituted or approved by the Government, the exemption claimed was rightly disallowed by the lower authorities”. He also relied on the decision of the Tribunal, Bombay Bench “E”, in the case of M.K. Mohamed Abraham v. 11th ITO [1983] 3 ITD 461, wherein it has been held that “the assessee could not claim exemption merely because Section 10U 7B) was placed on the statute book from 1-4-1973, since exemption could be claimed only on the basis of an order issued by the Central Government under this clause. Such an order had been issued in this case only in September 1975 and it had not been given retrospective effect. The assessee’s contention that when a provision was introduced in the statute with retrospective effect, all subsequent orders or notifications issued under that provision would also automatically take effect, from the date from which it came into effect, could not be accepted”. He, therefore, submitted that in view of the foregoing the special increment granted to the assessee in the form of special pay to be absorbed in future increase in pay can by no stretch of imagination, be treated as an award/reward so as to be exempt under the aforesaid provisions of Section 10. With reference to compulsory deduction of 6% from the salary towards PF, the learned representative relied on the decision of High Court of Justice (Kings Division Bench) in Smyth v. Stratton 5 TC 36 and of Court of Appeal in Belly. Gribble 4 Tax Cases 522, which are directly on deductions relating to PF under the then existing schemes, where under in certain cases the contributions made could also be forfeited. He submitted that the present scheme of PF deductions is much more liberal and the amount contributed is ultimately refundable together with interest. Thus there is no basis for claiming that the said deductions will erode the real income of the assessee. Rather it is a case of application of income and is for the benefit of the employee and his family. In this connection he also relied on the decision of the Allahabad High Court in the case of CIT v. Dr. P.N. Awasthi [1976] 105 ITR 320. This was a case of payment of fees to Doctors rendering services to Government employees and it was provided that 25% of the “fee” should be credited to the Government and the balance paid to the Doctor. It was held that the requirement “does not create any charge on the professional charges rendered by the assessee. If at all, it provides for the division of fees, that is to say, of the professional receipt already earned or accrued, owing to the assessee having rendered professional services. The patient is requested to make payment of 25% of the fees to the Government, for and on behalf of the assessee…there is no overriding charge on the source of income. It is a case of application of the income. Therefore 25% was part of the assessee’s assessable income. If the assessee pays the 25% to the Government, the same will be deductible as an allowable expense”. He also referred to the provisions of Section 198 of the Income-tax Act, where under the tax deducted at source is deemed to be income of the assessee for the purpose of computing his income. In view of the foregoing he submitted that the claim of the assessee ought to be rejected.
6. We have carefully considered the submissions made by both the parties on the aforesaid grounds of appeal. With reference to the claim of the assessee that the special increment granted to him by way of personal pay should be treated as exempt under the provisions of Section 10(17A)/ (17B), we feel that the submissions made by the learned departmental representative have merit and the said personal pay cannot be treated as an award/reward under the aforesaid provisions of Section 10 as neither it is in the nature of an award for literary, scientific or artistic work or attainment or for services for elevating the distress of poor, the weak and the ailing or for proficiency in sports and games instituted by the Central Government and nor it is in the nature of a reward for certain purposes which have to be approved by the Central Government under the provisions of Clause (17B) in public interest. The office memorandum issued by the Ministry of Health relating to grant of special increment does not make any reference to the provisions of Income-tax Act or give any impression that the said increment is in the nature of an award/reward and that the employee will be eligible for income-tax exemption. Normally, where the intention is to grant any exemption from income-tax, the relevant schemes floated by the Government of India would make a mention to that effect or special announcements are made in that behalf. In the circumstances, we reject the claim of the assessee. With reference to compulsory deduction of PF, we feel that the assessee has wrongly relied on the decision of the Hon’ble Supreme Court in the case of State Bank of Travancore (supra), inasmuch as, he has only picked up an observation of the Hon’ble Supreme Court that “if there is any diversion of income at source under any statute or by overriding title, then there is no income to the assessee”, which has been made in the context of the facts of the case which basically related to charging of interest on certain advances, termed as sticky advances. The said observation of the Hon’ble Supreme Court cannot be applied to the facts of the assessee’s case as the amount of 6% deducted out of the salary of the assessee towards PF, though compulsory in nature, is ultimately refundable to the assessee along with interest and also serves a social and public purpose insofar as it provides for the social security of the employee and the members of his family. We, therefore, feel that the DCIT (A) has rightly disallowed the claim of the assessee and we see no reason to interfere with his orders in this behalf.
7. The other grounds of appeal have not been pressed by the assessee and the same are, therefore, rejected.
8. In the result, the appeal of the assessee is dismissed.