2010 (7) TMI 76 - HC - Income Tax

Exemption u/s 10(10C) optional early retirement scheme (OERS) conditions to be satisfied eligible scheme Held that - Optional Early Retirement Scheme of RBI satisfies all the conditions of Rule 2BA and amounts received by retiring employees thereunder were eligible for exemption u/s. 10(10C). - the employees of Reserve Bank of India who accepted Optional Early Retirement Scheme, are entitled for the benefit of Section 10(10C) of the Income Tax Act, 1961, the Tax Case (Appeal) stands allowed.

Summary

Issues:
1. Whether the Tribunal was right in allowing the Revenue's appeal when the tax effect is less than Rs.2 lakhs and the revenue is governed by CBDT Instructions?
2. Whether the order of the Tribunal was correct under section 10(10C) of the Income Tax Act for an assessee under the public sector?

Issue 1:
The High Court did not delve into the first question raised regarding the Tribunal's decision on the tax effect and CBDT Instructions. Instead, the focus shifted to the second question concerning the correctness of the Tribunal's order under section 10(10C) of the Income Tax Act for a public sector assessee. The Court referred to a communication from the Government of India regarding the taxability of ex-gratia amounts received under the Optional Early Retirement Scheme (OERS) by Reserve Bank of India (RBI) employees during the assessment year 2004-05. The communication highlighted conflicting views on the eligibility of RBI employees for exemption under section 10(10C) based on previous decisions.

Issue 2:
The Court cited a communication from the Government of India and a previous order in a similar case involving an RBI employee who had taken voluntary retirement under the scheme. Referring to a Supreme Court decision and a Division Bench decision of the Court, the High Court concluded that employees of RBI who accepted the Optional Early Retirement Scheme were entitled to the benefit of section 10(10C) of the Income Tax Act, 1961. As the appellant's case fell within the scope of the Supreme Court and Division Bench decisions, and in line with the Government of India's communication, the Court allowed the Tax Case (Appeal), set aside the impugned order, and answered the second question of law in favor of the assessee. No costs were awarded, and the connected miscellaneous petition was closed.

This detailed analysis of the judgment from the Madras High Court provides a comprehensive understanding of the issues involved and the Court's reasoning in deciding the case.