1982 (4) TMI 137 - AT - Income Tax

Summary

Issues:
1. Whether the orders passed by the ITO under section 154 were erroneous and prejudicial to the interests of the revenue.
2. Whether the terminal benefits received by the assessees on retirement are exempt from tax under section 10(10A)(i) of the Income-tax Act.

Analysis:
1. The appeals before the Appellate Tribunal ITAT DELHI-A involved assessees who were employees of a public sector undertaking and received terminal benefits on retirement. The ITO initially held that the commuted pension and terminal benefits were exempt from inclusion in the total income of the assessees. However, the Commissioners, after finding the ITO's orders erroneous and prejudicial to revenue interests, issued show cause notices under section 263 and subsequently canceled the ITO's orders, restoring the original assessment orders against the assessees.

2. The Tribunal considered arguments based on a Delhi High Court case regarding a similar situation where a civil servant retired and received terminal benefits. The High Court held that the terminal benefits received on retirement and absorption in a public sector corporation were exempt from tax under section 10(10A)(i) of the Act. The Tribunal, following the High Court's decision and a CBDT circular, concluded that the terminal benefits received by the assessees in the present case were also exempt under the same provision. Consequently, the Tribunal allowed the appeals of the assessees, ruling in their favor based on the exemption provided under section 10(10A)(i) of the Income-tax Act.