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Issues Involved:
The issue involves the interpretation of whether compensation received by an employee upon voluntary retirement can be considered as salary under section 17(3)(i) of the Income-tax Act, 1961, and whether the relief under section 89(1) is applicable to such amounts. Judgment Summary: The High Court of Madras, in response to a question referred by the Income-tax Appellate Tribunal, considered the case of an employee who took voluntary retirement and received compensation. The central query was whether this compensation falls under the purview of section 17(3)(i) of the Income-tax Act, 1961, and if the employee is eligible for relief under section 89 of the Act. The court referred to a previous case, CIT v. J. Visalakshi [1994] 206 ITR 531, where it was established that amounts received by an employee at the time of resignation could be classified as salary, making the employee eligible for relief under section 89. Applying the same principle, the court concluded that compensation received by an employee upon voluntary retirement should also be considered as salary. Therefore, the relief under section 89 of the Income-tax Act, 1961, is applicable to the amount received by the employee from the employer upon voluntary retirement. In conclusion, the court answered the question in the affirmative, stating that the relief under section 89 is admissible in the case of an employee receiving compensation upon voluntary retirement. The judgment was delivered by N. V. Balasubramanian J. and Abdul Hadi J., with no costs awarded in the matter.
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