2007 (2) TMI 289 - HC - Income Tax

Voluntary Retirement under section 10(10C), 89 Exemption The assessee was an employee of UCO Bank, took the voluntary retirement in the Financial Year 2001-02. In this case Rajasthan High Court on the basis of the findings of the Tribunal held that assessee is entitled to relief under section 89 as relief under section 89 is entirely different exemption under section 10(10C). The appeal is dismissed. Decision in favor of assessee against the revenue

Summary

Issues:
1. Admissibility of relief under section 89 of the Income-tax Act on voluntary retirement scheme amount exceeding exemption under section 10(10C) of the Income-tax Act.

Analysis:
The High Court of Rajasthan addressed the issue of whether relief under section 89 of the Income-tax Act is admissible to an assessee on the voluntary retirement scheme amount exceeding the exemption under section 10(10C) of the Income-tax Act. The case involved an assessee who took voluntary retirement in the financial year 2001-02 under the Voluntary Retirement Scheme, 2001, receiving an amount from the employer. The assessee included this amount in their taxable income and claimed an exemption under section 10(10C) while also seeking relief under section 89. The Assessing Officer disallowed the relief claimed under section 89, leading to an appeal to the Commissioner (Appeals) who allowed the relief. The Revenue then appealed to the Income-tax Appellate Tribunal, which upheld the decision of the Commissioner (Appeals), prompting the Revenue to challenge this order.

The Revenue contended that the assessee was not entitled to relief under section 89 due to a specific order by the Board under Income-tax Rules, and cited a judgment of the Madras High Court which they argued was not applicable in the present case. However, the High Court emphasized that the amount received on voluntary retirement falls under "profits in lieu of salary" as per section 17(3)(i) of the Income-tax Act, making the assessee eligible for relief under section 89.

The Revenue relied on a Central Board of Direct Taxes letter indicating that any balance amount after the exemption under section 10(10C) was not eligible for relief under section 89. Despite the Revenue's efforts to obtain information on a special leave petition filed before the Supreme Court, the High Court held that the relief under section 89 is distinct from the exemption under section 10(10C), and the assessee is entitled to the relief regardless of the exemption limit.

The High Court also clarified that section 35DDA of the Income-tax Act, dealing with employer expenditure under Voluntary Retirement Scheme, does not apply to an employee receiving voluntary retirement benefits. Referring to the Madras High Court judgment in a similar case, the High Court affirmed that the relief under section 89 is admissible for the amount received on voluntary retirement, even if exceeding the exemption under section 10(10C). Consequently, the High Court dismissed the income-tax appeal, upholding the entitlement of the assessee to relief under section 89 on the voluntary retirement scheme amount exceeding the exemption limit.