2015 (5) TMI 75 - HC - Income Tax

Terms and conditions of Exit Option Scheme of RBI - Voluntary retirement scheme - exemption u/s 10(10C) - whether Exit Option Scheme of RBI were different from the terms and conditions of Exit Option Scheme framed by SBI as held by ITAT - Held that - The object of enacting section 10(10C) of the Income Tax Act, 1961 was to reduce employees strength so that unwanted personnel could seek voluntary retirement thereby enabling the public sector to achieve the true object for which it was established. The guidelines for implementing the scheme under section 10(10C) are laid down in Rule 2BA of the Income Tax Rules, 1962. The Reserve Bank of India had formulated one Optional Early Retirement Scheme and the amounts paid under this scheme, therefore, were eligible for exemption. Judgment in the case of Chandra Rangnathan & Ors. vs. Commissioner of Income Tax (2009 (10) TMI 498 - SUPREME COURT OF INDIA) rendered by the Hon'ble Supreme Court would conclude the issue- Decided in favour of the assessee.

Summary

Issues:
Interpretation of Exit Option Scheme terms and conditions under Income Tax Act, 1961.

Analysis:
The judgment addresses the repeated questions posed by the Revenue regarding the Exit Option Scheme terms and conditions. The Court refers to previous cases, such as Commissioner of Income Tax vs. Koodathil Kallyatan Ambujakshan, where it was established that section 10(10C) of the Income Tax Act aimed to reduce employee strength through voluntary retirement schemes. The guidelines for such schemes are outlined in Rule 2BA of the Income Tax Rules, 1962. The judgment emphasizes that amounts paid under the Reserve Bank of India's Optional Early Retirement Scheme are eligible for exemption under these rules.

The controversy in question revolves around compliance with the rules governing the Exit Option Scheme. The Court cites a Division Bench judgment and previous cases like Chandra Rangnathan & Ors. vs. Commissioner of Income Tax to assert that the issue of compliance has been conclusively settled in favor of the assessee. The judgments collectively establish that the Exit Option Scheme terms and conditions of different institutions, such as RBI and SBI, do not affect the eligibility for exemption under section 10(10C) of the Income Tax Act.

Ultimately, the Court concludes that the appeals do not raise any substantial question of law and dismisses them. The judgment highlights that the previous decisions consistently favored the assessee in similar cases, reinforcing the interpretation of the law regarding the Exit Option Scheme. No costs are awarded in this matter.