IN BETWEEN THE SATYAM SAGA, I AM INITAITING A TAX ISSUE WHICH MAY BE OF INTEREST OF MANY PROFESSIONALS.

A PERSON WHO IS WORKING EMPLOYEE. HE RESIGNES FROM THE SERVICES OF HIS EMPLOYER AND JOINS ANOTHER COMPANY. AT THE TIME OF SEPERATION HIS OLD EMPLOYER DEDUCTS NOTICE PERIOD PAY FOR TWO MONTHS. THIS AMOUNT IS REIMBURSED TO HIM BY HIS NEW EMPLOYER.

THE NEW EMPLOYER TREATS THIS AMOUNT AS PROFIT IN LIEU OF SALARY U/S 17(3) AND DEDUCTS THE TAX AT APPLICABLE RATE.

THE OLD EMPLOYER WHO HAS DEDUCTED THE NOTICE PERIOD PAY DOES NOT DEDUCT THE AMOUNT OF NOTICE PERIOD PAY FROM HIS TOTAL SALARY PAID TO HIM, FOR THE PURPOSES OF CALCULATING TDS THTERON. HIS CONTENTION IS THAT HE HAS NO POWER UNDER IT ACT TO REDUCE THE AMOUNT OF NOTICE PERIOD PAY, RECOVERED BY HIM FROM HIS TAXABLE INCOME.

IN THIS WAY TAX IS CHARGED TWICE ON THE SAME AMOUNT FROM THAT EMPLOYEE THOUGH THE EMPLOYEE HAS NOT RECEIVED ANY PERSONAL BENEFIT OUT OF THAT.

• WHETHER THE ACTION OF PREVIOUS EMPLOYER IS AS PER LAW.

• WHAT REMEDY IS AVAILABLE TO THE EMPLOYEE SO THAT HE IS NOT TAXED TWICE ON THE SAME AMOUNT.

• IN MY OPINION A PERSON CAN NOT BE CHARGED TO TAX TWICE ON THE SAME AMOUNT.

• IF ANY MEMBER MAY ENLIGTEN ON THIS ISSUE WITH THE LEGAL POSITION THEREON.

• IF SOME CASE LAW IS AVAIALBLE ON THIS ISSUE WHICH SUPPORTS THE VIEW SAME MAY PLEASE ALSO BE SHARED WITH ME.