2015 (5) TMI 427 - HC - Income Tax

Ex gratia/compensation amount as determined under section 10(10C) - assessee had exercised the option of voluntary retirement under the exit option scheme from State Bank of India - Tribunal upholding the findings of the Commissioner of Income-tax (Appeals) that the conditions mentioned in rule 2BA of the Income-tax Rules 1962, have been met - Held that - Income-tax Appellate Tribunal on facts has concluded that the respondent-assessee has served for a period of more than 10 years and at the time of retirement he was more than 40 years. The second exit option scheme of the State Bank of India was introduced to reduce the staff. It was just impossible to continue the new environment of computerisation applied to the workers and officers. The scheme has resulted in overall reduction of the employees. The assessee has furnished the declaration that he has not accepted any commercial employment in any company or concern belonging to the same management. Thus, on the facts, the first appellate authority has concluded that all the conditions laid down in rule 2BA of the Income-tax Rules are fulfilled. The question asked is no more res integra in view of CIT v. Koodathil Kallyatan Ambujakshan 2008 (7) TMI 259 - BOMBAY HIGH COURT wherein ruled that the Central Board of Direct Taxes clarification based on the RBI's letter stating that the receipts under the voluntary retirement scheme did not qualify for exemption under section 10(10C) of the Income-tax Act is not binding on the courts. The said judgment is holding the field for more than five years and the same is being followed by other courts. In view of the same, the second question of law does not arise for consideration. In view of the same, no interference is called for. The appeal fails and the same stands dismissed. - Decided against revenue.

Summary

Issues:
1. Whether the Tribunal correctly considered the 'exit option' scheme of the State Bank of India and the conditions under rule 2BA of the Income-tax Rules, 1962.
2. Whether the Tribunal erred in upholding the findings of the Commissioner of Income-tax (Appeals) regarding the eligibility for deduction under section 10(10C) of the Income-tax Act, 1961.

Issue 1:
The respondent, a retired employee of State Bank of India, declared total income for assessment year 2008-09 and claimed ex gratia/compensation under section 10(10C) of the Income-tax Act. The original authority disallowed the claim, but the first appellate authority and Income-tax Appellate Tribunal allowed it. The Department raised questions regarding the Tribunal's consideration of the 'exit option' scheme and rule 2BA conditions. The Tribunal found the respondent fulfilled the conditions, having served over 10 years, retired over 40, and not taken commercial employment. The first appellate authority's decision was upheld, interpreting provisions in favor of the assessee.

Issue 2:
The Department questioned the Tribunal's decision on the eligibility for deduction under section 10(10C). Citing a Bombay High Court judgment, it was established that the Central Board of Direct Taxes' clarification, stating that voluntary retirement scheme receipts did not qualify for exemption, was not binding on the courts. The precedent set by the Bombay High Court was followed, indicating that the second question of law did not require consideration. Consequently, the appeal was dismissed, as no interference was deemed necessary based on existing legal interpretations.

This judgment from the Karnataka High Court addressed the Department's concerns regarding the 'exit option' scheme of the State Bank of India and the eligibility for deduction under section 10(10C) of the Income-tax Act, 1961. The court carefully analyzed the facts, interpretations of relevant rules, and precedents set by other High Courts to arrive at a decision that favored the respondent-assessee. The judgment highlighted the importance of fulfilling statutory conditions and the binding nature of legal precedents in determining tax liabilities related to voluntary retirement schemes.