2004 (10) TMI 544 - AT - Income Tax

Summary

Issues:
Claim of deduction under section 89(1) of the Income Tax Act disallowed by Assessing Officer.

Analysis:
The case involved an appeal by an individual assessee against the order of the Commissioner of Income-tax relating to the assessment year 2001-02. The assessee, who had opted for voluntary retirement from Bank of India, received an ex gratia payment under the Voluntary Retirement Scheme. The assessee claimed exemption under section 10(10C) of the Act for a portion of the payment and relief under section 89(1) for the remaining amount. However, the Assessing Officer disallowed the deduction under section 89(1) on the grounds that relief under section 10(10C) had already been allowed. This decision was upheld by the Commissioner of Income-tax.

It was noted that a similar issue had been considered by the ITAT, Panaji Bench in a previous case. The Panaji Bench held that the amount received under the Voluntary Retirement Scheme constituted compensation for 'termination of service' under section 17(3) of the Act. The Bench concluded that the assessee was entitled to relief under section 89(1) on the amount received under the scheme after reducing the exemption under section 10(10C). The proviso to section 10(10C) was clarified to have no relevance for relief under section 89(1), emphasizing the distinction between an exemption and relief.

The ITAT, Delhi, relied on the decision of the Panaji Bench and ruled in favor of the assessee. The Tribunal directed the Assessing Officer to grant relief to the assessee in accordance with the decision of the Panaji Bench. Consequently, the appeal filed by the assessee was allowed, overturning the decision of the Assessing Officer and the Commissioner of Income-tax.

In conclusion, the ITAT's decision highlighted the importance of distinguishing between exemptions and relief under different sections of the Income Tax Act. The judgment clarified that an assessee could be entitled to relief under section 89(1) even if an exemption had been granted under section 10(10C) in the same assessment year.