2006 (1) TMI 93 - HC - Income Tax

Whether, Tribunal was right in holding that the assessee is eligible to claim simultaneous benefit u/s 10(10C) as well as section 89(1) in respect of the compensation received under the voluntary retirement scheme? - The second proviso to section 10(10C) only refers to exemption claimed in any other year. Every assessment year is a self-contained unit and the mere fact that the relief under section 89 had been spread over several years, did not mean that the relief was not in respect of a particular assessment year. There was no prohibition to the twin benefits in respect of the amount received under the voluntary retirement scheme. The relief contemplated under section 89(1) is aimed to mitigate hardship that may be caused on account of the high incidence of tax due to progressive increase in tax rates. Payment under the voluntary retirement scheme is covered by the word salary which has been given a very wide definition in section 17. Since the assessee was covered by section 89, he would get both the benefits. revenue appeal dismissed

Summary

Issues:
Interpretation of sections 10(10C) and 89(1) of the Income-tax Act regarding exemption for compensation received under a voluntary retirement scheme.

Analysis:
The High Court of Madras addressed the tax case appeals concerning the exemption of compensation received under a voluntary retirement scheme for the assessment year 2001-02. The Revenue appealed against the order of the Income-tax Appellate Tribunal, which allowed the exemption under section 10(10C) but denied it under section 89(1) of the Income-tax Act, arguing that both exemptions cannot be claimed simultaneously. The Commissioner of Income-tax (Appeals) and the Tribunal interpreted the sections differently, with the Commissioner granting the benefit to the taxpayer due to ambiguity. The Revenue raised the substantial question of law regarding the eligibility of the assessee to claim benefits under both sections simultaneously.

The court referred to a previous decision in CIT v. G.V. Venugopal, where it was held that the second proviso to section 10(10C) does not prohibit claiming exemptions in different assessment years. The court emphasized that each assessment year is self-contained, and the relief under section 89(1) aims to mitigate tax burden due to progressive tax rates. The definition of 'salary' under section 17 is broad, covering payments under the voluntary retirement scheme. Therefore, the court concluded that there is no prohibition on claiming both benefits simultaneously for the amount received under the scheme.

Based on the settled proposition from the previous decision, the court dismissed the appeals by the Revenue, affirming that the assessee is eligible to claim benefits under both sections 10(10C) and 89(1) for the compensation received under the voluntary retirement scheme for the assessment year in question. As a result, the court also dismissed the related applications.