2010 (10) TMI 746 - HC - Income Tax

Reopening - Voluntary Retirement Scheme (VRS) - exemption u/s 10(10C) - petitioner s employer RBI had deducted tax at source and disallowed the exemption on the ground that its scheme was not as per the provisions of Rule 2BA of the Income-tax Rules, 1962 - non-recording of reasons - The grounds of challenge are more in the nature of grounds of appeal and therefore cannot be considered

Summary

Issues:
Challenge to order under Article 226 of the Constitution of India regarding exemption under section 10(10C) of the Income-tax Act, 1961 (1961 Act).

Analysis:

Petitioners' Case:
The petitioners opted for Voluntary Retirement Scheme (VRS) and claimed exemption under section 10(10C) of the 1961 Act. The exemption was initially granted but later withdrawn under section 147 of the 1961 Act. The petitioners argued that they are entitled to the exemption of Rs. 5,00,000 as allowed by various Income-tax Appellate Tribunals. They relied on relevant case laws to support their claim. The petitioners contended that the order rejecting their application under section 264 of the 1961 Act should be challenged.

Respondent's Case:
The Respondent authorities maintained that no exemption was allowed under section 10(10C) as tax was already deducted at source. The Respondent argued that the petitioners had claimed exemption under section 10(10C) in their returns.

Case of the Reserve Bank of India:
The Reserve Bank of India argued that the order under challenge was passed under section 264 of the 1961 Act, and no appeal had been filed within the stipulated time. They contended that the order was not prejudicial to the petitioners as the assessment order disallowing the exemption had not been challenged. The Reserve Bank of India also raised objections regarding the non-joinder of parties and the compliance with Income-tax Rules.

Petitioner-in-Reply:
The petitioner argued that since there is no provision for an appeal from an order under section 264 of the 1961 Act, a writ petition is maintainable. They refuted the Respondent's contentions and highlighted the arbitrariness in the order dated 29th March, 2007. The petitioner emphasized the importance of natural justice and distinguished relevant case laws to support their position.

Respondents in Reply:
The Respondents argued that the Explanation in section 264 applies to the entire section and not just a specific subsection. They contended that there was mis-joinder of parties and that certain case laws cited by the petitioners were not applicable to the current case. The Respondents emphasized the need for strict construction of fiscal statutes and raised objections regarding the petitioner's compliance with procedural requirements.

Conclusion:
The Court considered the submissions and found that the order dated 29-3-2007 was not prejudicial to the petitioners as per section 264 of the 1961 Act. The Court noted the lack of pleading regarding prejudice and the absence of a copy of the scheme in question. The Court held that the application failed due to various reasons including the absence of prejudice pleadings, lack of scheme details, and misinterpretation of the relevant legal provisions. The Court ruled that the writ petition could not be entertained without a valid basis for prejudice.