2010 (7) TMI 796 - AT - Income Tax

Voluntary retirement payments - claim u/s 10(10C) - The facts of the case are that assessee is a Deputy Manager in SBI and has taken VRS under exit option scheme introduced by the Bank of India. The assessee received salary and pension (including ex gratia). On examination of Form No. 16 the AO noticed that assessee received ex gratia of Rs. 3, 07, 236 on VRS. He claimed exemption u/s10(10C). The AO disallowed the claim by following Circular No. Chief CIT Baroda letter BRD/Chief CIT/Tech/MICS/10(10C)/2009-10. HELD THAT - In the case of SAIL DSP VR Employees Association 1998 v. UOI 2003 (2) TMI 46 - CALCUTTA HIGH COURT held as under Sums paid on voluntary retirement to the extent of rupees five lakhs are exempted from being charged to tax by reason of section 10(10C). Even if the payment is stretched over a period of years the same would not become chargeable to tax in any subsequent assessment year. They have also held that provision of section 10(10C) should be interpreted in a manner beneficial to the optee for voluntary retirement. Similarly In the case of CIT v. P. Surendra Prabhu 2005 (9) TMI 67 - KARNATAKA HIGH COURT held that the assessee employee of the respondent bank was not only entitled to the benefit of exemption u/s 10(10C) to the extent prescribed in the provision itself but for any amount over and above the prescribed limit; under the aforesaid provision the assessee was also entitled to relief u/s 89(1) r/w rule 21A. Respectfully following the above decision of the Tribunal we allow the claim of assessee. In the result appeal of the assessee is allowed.

Summary

Issues:
Allowability of exemption under section 10(10C) of the IT Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Ahmedabad involved the issue of whether the assessee was entitled to exemption under section 10(10C) of the Income Tax Act, 1961. The assessee, a Deputy Manager in SBI, had opted for Voluntary Retirement Scheme (VRS) and received salary and pension, including an ex gratia amount. The Assessing Officer disallowed the exemption claim under section 10(10C) based on a circular and did not agree with the assessee's reliance on a Tribunal decision. The CIT(A) also confirmed the disallowance, attempting to distinguish a Third Member's decision in a similar case. However, the Tribunal found the CIT(A)'s distinction unsound, emphasizing that the employer's compliance with rule 2BA was the only reason for disallowance. The Tribunal highlighted that the employer's scheme for VRS did not need approval post-2002 and the Assessing Officer could have verified the scheme if in doubt. The Tribunal referenced relevant case laws and High Court judgments, including interpretations of section 10(10C) favoring employees opting for voluntary retirement. It noted that the jurisdictional High Court's decision was binding and held in favor of the assessee, allowing the exemption claim under section 10(10C) up to Rs. 5 lakhs.

Therefore, the Tribunal concluded that the assessee was entitled to the exemption under section 10(10C) of the Act, following the decisions of various High Courts and interpreting the provision liberally in favor of the retired employee. The Tribunal emphasized the importance of adopting a view favorable to the assessee when interpreting such provisions. As a result, the appeal of the assessee was allowed, granting the exemption under section 10(10C) of the IT Act, 1961 up to the prescribed limit of Rs. 5 lakhs.