2005 (11) TMI 226 - AT - Income Tax

Summary

Issues:
1. Exemption under section 10(10C) not allowed in full amount.
2. Relief under section 89(1) not granted for VRS amount taxed as salary income.
3. Taxing income on accrual/receivable basis without allowing exemption under section 10(10C) in full amount.

Analysis:
1. The appeal was filed against the order of the CIT(A) regarding the exemption under section 10(10C) for the assessment year 2003-04. The employer determined the voluntary retirement benefit at Rs. 7,03,395, out of which Rs. 1,40,679 was received in the relevant year, and the balance was received in instalments in the subsequent financial year. The AO granted exemption only for the amount actually received during the year. The CIT(A) upheld this decision. The appellant argued that as per Circular No. 7 of 2003, the exemption should apply to the total amount of Rs. 5,00,000, even if received in instalments. The Tribunal agreed with the appellant, citing the circular's clarification that the exemption applies to the total amount not exceeding Rs. 5,00,000, whether received in full or in instalments. The Tribunal directed the AO to allow the exemption of Rs. 5,00,000 as claimed by the assessee.

2. The appellant also raised the issue of relief under section 89(1) for the VRS amount taxed as salary income. However, the details of the decision on this issue are not explicitly mentioned in the summary provided.

3. The third issue involved the taxation of income on an accrual/receivable basis without allowing the full exemption under section 10(10C). The Tribunal, after considering the circular and relevant provisions, found that the Revenue authorities erred in denying the full exemption to the assessee. The Tribunal held that the claim of the assessee for exemption under section 10(10C) up to Rs. 5,00,000 was in accordance with the law. Therefore, the Tribunal directed the AO to allow the full exemption claimed by the assessee. As a result, the appeal of the assessee was allowed on this ground.