2008 (9) TMI 577 - HC - Income Tax

Optional Early Retirement Scheme floated by the Reserve Bank of India - assessee, claimed exemption under section 10(10C), out of the compensation received under the Scheme - Reserve Bank of India has not deducted the exemption claimed under section 10(10C) on the compensation received under Optional Early Retirement Scheme , but it has duly deducted tax, treating this compen-sation as fully taxable and remitted to the Government account - Assessee claimed refund - Assessing Officer stated that the Scheme of Optional Early Retirement Scheme does not fulfill the conditions laid down under rule 2BA and hence, the ex gratia paid under the Scheme does not qualify for exemption under section 10(10C), rejected the claim of the assessee - Held that - the monetary limit prescribed by the Central Board of Direct Taxes for filing appeals before the High Court and it does not also fall within the exceptions provided for filing appeal before the High Court, even where the tax effect is less than Rs. 2,00,000 under Circular F. No. 279/126/98-IT, dated March 27, 2000. Learned counsel appearing on either side fairly stated that the tax effect in all these cases worked out to less than Rs. 2 lakhs - if the tax effect is less than the one stated in the circular the Revenue need not agitate the issue on appeal and the circular is binding on them - appeal is dismissed

Summary

Issues:
1. Appeal against the common order of the Income-tax Appellate Tribunal regarding exemption under section 10(10C) of the Income-tax Act, 1961.
2. Interpretation of the conditions under rule 2BA for exemption under section 10(10C).
3. Determination of the tax effect for filing appeals before the High Court.
4. Application of exceptions for filing appeals before the High Court based on Circular F. No. 279/126/98-IT.

Analysis:

1. The Revenue appealed against the common order of the Income-tax Appellate Tribunal concerning the exemption claimed under section 10(10C) of the Income-tax Act, 1961. The case involved an employee of the Reserve Bank of India who retired under the "Optional Early Retirement Scheme" and claimed exemption on the compensation received. The Assessing Officer rejected the claim, stating that the scheme did not fulfill the conditions under rule 2BA for exemption. The Commissioner of Income-tax (Appeals) upheld this decision, but the Income-tax Appellate Tribunal allowed the appeal. The main question was whether the assessee was entitled to the deduction under section 10(10C) despite the scheme not meeting the criteria of rule 2BA.

2. The judgment highlighted the importance of the tax effect in determining the filing of appeals before the High Court. The monetary limit prescribed by the Central Board of Direct Taxes for filing appeals was less than Rs. 2 lakhs. The Circular F. No. 279/126/98-IT specified exceptions for filing appeals, including cases where revenue audit objections were accepted, adverse orders on Board's orders, prosecution proceedings against the assessee, or constitutional validity challenges. Both parties confirmed that the tax effect in this case was less than Rs. 2 lakhs.

3. The judgment referred to a previous case where the Central Board of Direct Taxes re-fixed monetary limits to reduce litigation in filing appeals. It emphasized that the Revenue did not establish that the appeal fell within the exceptions provided in the circular. Additionally, it cited a judgment stating that if the tax effect is below the specified limit, the Revenue is not required to pursue the issue on appeal, as per the circular.

4. Based on the above analysis and considering previous judgments, the appeal was dismissed as the questions of law raised had already been addressed. The judgment reiterated the binding nature of the circular on the Revenue when the tax effect is below the specified limit, emphasizing the importance of following established legal principles and precedents in tax matters.