2015 (10) TMI 405 - SC - Income Tax

Compensation received on voluntary retirement under the Early Retirement Option - deduction under Section 10(10C) for terminal benefits along with relief under Section 89(1) of the Income Tax Act for the ERO components and gratuity - HC denied exemption - Held that - Learned counsel for the appellant has produced copies of various orders passed by this Court in certain appeals arising in identical circumstances and holding that in such cases deduction under Section 10(10C) of the Act would be available to the assessee. The learned counsel appearing for the respondent could not dispute the aforesaid position granting relief to similarly situated persons. We, accordingly, set aside the order of the High Court and allow the present appeal holding that the appellant shall be entitled to exemption under Section 10(10C) of the Income Tax Act and, as a result, he will also be entitled to the refund of the aforesaid amount. - Decided in favour of assessee.

Summary

Issues:
Claim of exemption under Section 10(10C) of the Income Tax Act for terminal benefits and relief under Section 89(1) for ERO components and gratuity.

Exemption under Section 10(10C) of the Income Tax Act:
The appellant, an employee of ICICI bank, sought voluntary retirement under the Early Retirement Option (ERO), 2003 Scheme. Upon retirement, the employer paid a sum of Rs. 9,37,490 as compensation, with Rs. 3,00,051 deducted as income tax. The appellant claimed exemption of Rs. 5 lakhs under Section 10(10C) for terminal benefits in the income tax return for Assessment Year 2004-05. The Assessing Officer denied the exemption, stating that since the ERO Scheme was not statutory or compliant with Rule 2BA of the Income Tax Rules, Section 10(10C) would not apply. The High Court upheld this decision. However, the appellant cited previous Supreme Court judgments granting relief under Section 10(10C) in similar cases. The Supreme Court allowed the appeal, holding that the appellant is entitled to exemption under Section 10(10C) and the consequent refund of the deducted amount.

Relief under Section 89(1) for ERO components and gratuity:
In addition to the exemption claim under Section 10(10C), the appellant also sought relief under Section 89(1) for the ERO components and gratuity. The Assessing Officer and the High Court had denied this relief based on the non-statutory nature of the ERO Scheme. However, the Supreme Court's decision granting exemption under Section 10(10C) also implies that the appellant is entitled to relief under Section 89(1) for the ERO components and gratuity. The appellant succeeded in establishing his right to this relief based on the previous Supreme Court judgments cited in support of the exemption claim.

In conclusion, the Supreme Court allowed the appeal, ruling in favor of the appellant's claim for exemption under Section 10(10C) of the Income Tax Act for terminal benefits and relief under Section 89(1) for ERO components and gratuity. The appellant was deemed entitled to the refund of the deducted amount and relief as per the provisions of the Act.