2012 (1) TMI 73 - HC - Income Tax

Relief u/s 89(1) - ex-gratia payment received under VRS scheme Revenue allowed exemption u/s 10(10C) but denied relief u/s 89(1) Held that - Similiar controversy is settled by the two Division Bench decisions of this Court in case of CIT vs Harendra Natah Tripathi and CIT vs Subhash Chand Goyal 2010 (7) TMI 754 - ALLAHABAD HIGH COURT and their being no decision to the contrary. Relief u/s 89(1) is also admissible in such a case. Present appeal does not raise any question of law which requires to be decided by this Court Decided in favor of assessee.

Summary

Issues:
1. Characterization of ex-gratia compensation receipt under V.R.S.
2. Eligibility of section 89(1) benefit for ex-gratia/compensation recipients.

Analysis:

Issue 1: Characterization of ex-gratia compensation receipt under V.R.S.
The case involved an appeal under section 260 A of the Income Tax Act, 1961 against an order by the Income Tax Appellate Tribunal regarding the character of ex-gratia compensation receipt under the Voluntary Retirement Scheme (V.R.S.). The respondent, an employee of UCO Bank, received a lump sum ex-gratia payment upon opting for voluntary retirement. The main contention was whether this payment should be considered as part of the salary. The Assessing Officer allowed exemption under section 10(10C) of the Act but did not permit relief under section 89(1). The Commissioner of Income Tax (Appeals) partially allowed the appeal by granting the benefit of section 89(1). The Tribunal later dismissed the appeal, leading to the present case.

Issue 2: Eligibility of section 89(1) benefit for ex-gratia/compensation recipients
The key question was whether the assessee receiving ex-gratia compensation was entitled to the benefits under section 89(1) of the Income Tax Act. The court referred to previous decisions, notably Commissioner of Income Tax Versus Harendra Natah Tripathi and Commissioner of Income Tax Versus Subhash Chand Goyal, where it was held that relief under section 89(1) is applicable in such cases. The court found no distinguishing feature presented by the Revenue's counsel to warrant a different view. Consequently, the court upheld the decisions of the Division Bench and concluded that the appeal did not raise any new legal question necessitating its intervention.

In conclusion, the High Court dismissed the appeal, affirming the applicability of section 89(1) benefits to ex-gratia compensation recipients under the V.R.S. scheme, based on established legal precedents and the absence of contradictory decisions.