Regarding tax liability for the returned joining bonus


Analyst

Hi,

I need some advice regarding the tax liability on the joining bonus that was paid to me and then taken back.

Actually I joined a company and they paid me a joining bonus of Rs.3 lakhs on which they deducted TDS of Rs.92700 at source and paid me the balance which is fine.

Now that I left the company and they are are taking back the whole amount (Rs.3 lakhs). I am also OK to pay back the whole amount, but I am requesting them to make sure that the reduce my gross taxable income (income under the head 'Salaries') in my form-16 by the same amount so that I can take refund of the tax which I initially paid on this amount. I am not asking them to pay me back the tax, rather, I will claim refund while filing the return. But for that it should be reflected in my form-16 and form-26AS accordingly.

This is a very simple thing which I am asking them, I am not liable to pay tax on something which is no more my income. Initially they paid me the amount and deducted tax which is fine and now that they are taking that amount back then the tax which I paid on this amount needs to be refunded.

 

But I can only take it they show it in form-16. But they are constantly declining the same and are harassing me on this issue. Its been over month that I have been following this issue with them, but they are not doing it and are just troubling me on this aspect.

I am sure I am not asking anything wrong and ideally they should simply do this thing. But on the contrary they are not at all helping me.

That's why I am reaching to you for your expert opinion and suggestion that in case they continue to do this and don't reflect that amount in my form-16 then what options are left with me.

How can I take the refund of tax that I paid initially on that amount. They say this is application of income, but ideally under this non-self imposed obligation, this cannot be application of income.

 

Since that 3 lakhs is no more my income, I am not liable to pay tax on that amount.

Request you to please help me and provide me with a solution to handle this situation with them. 

Looking forward to hear from you.

Please help and advise.

 

Thanks & Regards,

Rishi

 
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Analyst

While I was reading some sections that could be relevant here. I came across Sec-60 & 61 of the income tax act. Whci states that any revokable income is taxable in the hands of the transferor and not transferee. So in the above case, does this apply?

http://www.incometaxindia.gov.in/Acts/Income-tax%20Act,%201961/2014/102120000000036980.htm

I mean in this case the transferer is my company and I am the transferee and the transfer of income (the joining bonus) was made under the revokable agreement (to pay back if I leave before 2 years).

So does this mean this act applies to my case and I can use it to fight with them. 

Need urgent advice from all the knowledgebale people here.

The company is saying that let us know if there is aprovision in IT act that substantiate my claim. 

Please help adn advise.

Thanks,

Rishi

 
Reply   
 

Please refer the case laws given below:

1. Salary foregone before the end of the accounting year when it was strictly due could not be regarded as Income - CIT V Mehar Singh Sampuram Singh Chawla [1973] 90 ITR 219 (Delhi)

2. CIT V Raghunath Murti (2009) 178 Taxman (Delhi) - A company managing director has to refund excess remuneration taken and filed revised return as the remuneration taken was in excess of the amount mentioned in Companies Act, 1956

If your employer is still not considering, at the time of filing return, reduce the amount and claim refund. Please collect your account statement from the company and also the Contract you had with company, which states the Joining Bonus needs to be refunded back.


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Analyst

Thanks Sunil for a quick response. I will look into those case laws. They are little different from my case, but can be helpful.

Regarding reducing the amount while filing return - in that case what I input in the return and the figure in my form-16 from company will not match. And in that case the income tax department can reject my claim.

Also will the account statement and/or a letter from company stating they have tken back 3 lakhs from me will be a sufficient proof to provide to IT department in case they call for scruitiny if I file return with reduced amount to get refund. Can that act as a valid and legal proof to show to IT department?

Any views about Section 61 I shared earlier?

Thanks again,

Rishi

 
Reply   
 

The case laws I had mentioned is about forteiture of salary due to non-compliance of notice period and returning of excess remuneration taken by the director. Both the cases are similar to your case and the same principles will apply.

There is no provision in Income Tax which allows deduction for notice pay or any other deduction by virtue of the contract between employee and employer. If the employer didn't reduce the amount in Form 16, then there is a chance for IT department to take your file for scrutiny if you file the return with a reduced income. At that point of time, the contract and the account statement will be helpful to you to prove the genuinity of your case. At that point of time you can mention the case laws I had mentioned earlier. I cannot confirm that AO will decide in your favour, but I'm sure that if it is properly presented you will get the benefit from the appellate authorities. 

Section 60 & 61 is related to transfer of income from assets and revocable transfer of assets. Both the sections talks about the chargeability of income arising out of such arrangement and the same is not applicable in your case.

 
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Analyst

OK, thanks for clarity regarding sec 60 & 61.

But for the filing of tax by reducing my gross income by 3 lakhs to get refund - Is this the right way of doing it.

I mean the salary certificate and the settlement statement where it shows that 3 lakhs was taken back - will it form a sufficient proof for my case.

I am fighting with them to make the adjustment in my full and final statement and also make the changes in form-16 and form-26AS, so that I can file the return accordingly. But they say that they won;t do it.

Can I file a complaint with ITO? Will that be helpful? Or I just take what they say and then fil tax as you suggested and use the settlement fomrs as proof for the same.

I am little concerned about weather the AO will consider those statements as valid proof fo the same? I can also keep a copy of the cheque that I will use to pay them the money back.

Need some suggestions.

Please help.

 
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Analyst

Dear Senior and knowledgeable members, please help me by clarifying the above points.

Can I file return by reducing that amount myself which the company refused to reflect in form-16? If yes, then if it comes for scruitny then, can I use the Full & Final statement where it shows I paid back the whole amount (along with the copy of cheque) as a valid proof to support my claim?

Please help.

Rishi

 
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Analyst

Or should I just pay the amount after keeping the tax and ask the employer to take a refund of the tax amount? And the contract was not signed on my stamp paper or something. It was just on company letter head. Cna they use it against me? In fact I am agreeing to pay back in full also under the condition that they reflect the taken back amount in the form-16. Any help with spome reference to the provisions under the IT tax will be really helpful.

Thanks,
Rishi

 
Reply   
 

There is no specific provisions in the Income Tax Act on this. The only support we can take is the case laws I had mentioned earlier.

If the company didn't deduct the same while giving Form 16, as mentioned earlier, only recourse available to you is to file the return deducting the same. At the time of scrutiny, if at all happens, take a stand that the amount received is in the nature of advance, and will be able to consider as Income only on completion of 2 years as per contract. Due to ignorance, you offered the same as income and didn't carry forward the TDS credit. 

Regarding the contract, better to take a legal opinion regarding withholding of tax amount. The company cannot claim any refund for the tax paid for you.

 

 
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Hi Rishi T,

I was looking online for my issue which looks similar to your case. Can you please let me know how you resolved your issue. In my case also the company took 2.5 lakh and are not agreeing to deduct the amount from my Annual income. They gave me a certificate indicating I paid my amount to the company. Can you please suggest what could be done?

Thanks,

Anshul

 
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