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Issues:
1. Whether the amount received in lieu of surrender of part of the pension is exempt under section 10(10A) of the Income-tax Act, 1961. 2. Whether the commuted value of pension was properly determined according to the provisions of section 10(10A)(ii). 3. Whether the payments received in commutation of pension are capital receipts not liable to tax. 4. Whether the assessee is entitled to exemption on the service benefit received in lieu of commutation of pension. Analysis: 1. The case involved an individual who received a service benefit of Rs. 77,760 in lieu of surrendering part of his pension. The issue was whether this amount qualified for exemption under section 10(10A) of the Income-tax Act, 1961. The Assessing Officer (AO) disallowed the exemption, considering it as part of the pension surrendered. However, the Appellate Authority held that the amount was payment on account of the commuted value of the pension and thus exempt under section 10(10A). 2. The debate centered on whether the commuted value of the pension was properly determined as per the provisions of section 10(10A)(ii). The Departmental Representative argued that the exemption was wrongly allowed as the commuted value was not determined according to the pension scheme's requirements. In contrast, the assessee's counsel contended that the employer's pension scheme had appropriately calculated the commuted value based on various factors. The Tribunal noted that the exemption under section 10(10A) applies up to specified limits, and the commuted value determination conditions were relevant for setting those limits. 3. Another argument raised was whether the payments received in commutation of pension should be considered capital receipts not subject to tax. The assessee's counsel referenced a Supreme Court judgment to support the position that such receipts might not be taxable. However, the Tribunal emphasized that the definition of 'salary' under the Income-tax Act includes profits in lieu of salary, indicating that such receipts are generally taxable unless exempted under specific provisions. 4. The final issue addressed was the entitlement of the assessee to exemption on the service benefit received in lieu of commutation of pension. The Tribunal agreed that the assessee was entitled to exemption under section 10(10A)(ii) for the service benefit received, subject to determining the maximum limit of exemption based on factors like age, health, and interest rates. The Tribunal directed the Assessing Officer to verify these particulars and determine the extent of exemption accordingly, modifying the Appellate Authority's order in favor of the assessee. In conclusion, the Tribunal partially allowed the appeal, affirming the assessee's entitlement to exemption on the service benefit received in connection with the commutation of pension, subject to proper determination of the maximum exemption limit as per the provisions of section 10(10A)(ii).
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