2014 (8) TMI 527 - AT - Income Tax

Tax effect below prescribed limit - monetary limit for filing an appeal - Eligibility for deduction u/s 10(10C) Held that - CIT(A) had rightly analysed various judgements rendered vis-a-vis scheme of the Bank and condition mentioned in Rule 2BA and held that assessee is eligible for deduction u/s 10(10C) - all the requirements of Rule 2BA are satisfied - both circulars are not binding to the Tribunal the tax effect involved in the appeal filed by the Revenue is less than ₹ 3 lacs, and therefore, the appeal is not maintainable - the appeal should not be entertained Decided against Revenue.

Issues Involved:
1. Compliance with Board Instructions and Monetary Limits for Filing Appeals.
2. Eligibility for Exemption under Section 10(10C) of the Income Tax Act, 1961.
3. Adherence to Rule 2BA of the Income Tax Rules, 1962.
4. Applicability of CBDT Circulars and Judicial Precedents.

Issue-Wise Detailed Analysis:

1. Compliance with Board Instructions and Monetary Limits for Filing Appeals:
The department challenged the CIT(A)'s order, arguing that it contravened the Board's Instructions in F. No.200/34/2009-IT.I dated 6.10.2009 and Instruction No.3/2011 dated 09.02.2011 concerning the monetary limit for filing appeals. The Tribunal noted that the tax effect in the present appeal was less than Rs. 3 lakhs, making the appeal non-maintainable under the CBDT's latest Circular instruction no. 3/2011. Consequently, the appeal was dismissed on this ground.

2. Eligibility for Exemption under Section 10(10C) of the Income Tax Act, 1961:
The assessee, a former employee of State Bank of India, claimed an exemption of Rs. 5,00,000 under Section 10(10C) after taking voluntary retirement under the "Exit Option" scheme. The Assessing Officer denied this exemption, asserting that the scheme did not comply with Rule 2BA. However, CIT(A) allowed the exemption, citing various High Court and Tribunal decisions which held that the amount received under voluntary retirement schemes is eligible for exemption under Section 10(10C) to the extent of Rs. 5,00,000.

3. Adherence to Rule 2BA of the Income Tax Rules, 1962:
The CIT(A) observed that the "Exit Option" scheme met the conditions laid out in Rule 2BA. The CIT(A) referenced several judicial precedents, including:
- CIT vs. Nagesh Devidas Kulkarni (2007) 291 ITR 407 (Bombay)
- CIT vs. Koodathil Kallyatan Ambujakshan (2009) 309 ITR (Bom)
- CIT vs. P. Surendra Prabhu (2005) 279 ITR 402 (Kar)
These cases established that schemes satisfying Rule 2BA's conditions are eligible for the exemption under Section 10(10C).

4. Applicability of CBDT Circulars and Judicial Precedents:
The CIT(A) and the Tribunal noted that CBDT Circulars are binding on the Income Tax Officers but not on appellate authorities or courts. The Tribunal cited the Supreme Court's observation in CIT vs. Hero Cycle Pvt. Ltd. (1997) 228 ITR 463, which reinforced this principle. The Tribunal upheld the CIT(A)'s decision, which relied on various judicial precedents confirming that even if a scheme does not strictly conform to Rule 2BA, the exemption under Section 10(10C) can still be granted based on judicial interpretations favoring the assessee.

Conclusion:
The Tribunal upheld the CIT(A)'s order granting the exemption under Section 10(10C) and dismissed the department's appeal due to the low tax effect and non-compliance with the monetary limits for filing appeals. The judgment emphasized the precedence of judicial interpretations and the limited binding nature of CBDT circulars on appellate authorities.

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