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2016 (6) TMI 929 - AT - Income TaxRectification of mistake - benefit of exemption u/s. 10(10C) denied - non-consideration of the judgment of Hon ble Calcutta High Court and the Third Member decision - Held that - We find that the Third Member decision of this Tribunal in the case of Krishnagopal Saha, 2009 (7) TMI 173 - ITAT CALCUTTA-B had held that in respect of an assessee who was a former employee of Standard Chartered Bank were admittedly voluntary retirement scheme offered by Standard Chartered Bank was not in conformity with Rule 2BA of the Rules held that assessee was eligible for exemption u/s. 10(10C) of the Act to the extent of ₹ 5 lacs. We also find that the Hon ble Supreme Court in the case of Saurashtra Kutch Stock Exchange Ltd., 2008 (9) TMI 11 - SUPREME COURT had held that non-consideration of a judgment of a jurisdictional High Court is also a mistake apparent on record, which can be rectified u/s. 154 of the Act. We hold that the provisions contained in the Rules cannot override the provisions contained in the Act. Rule is only a subordinate piece of legislation. The Act specifically provides for granting exemption u/s. 10(10C) of the Act to the extent of ₹ 5 lacs and applying the purposive test of those provisions, we hold that the assessee should be given the benefit of exemption u/s. 10(10C) of the Act to the extent of ₹ 5 lacs. Hence, non-consideration of the judgment of Hon ble Calcutta High Court in SAIL DSP VR. EMPLOYEES ASSOCIATION 1998 Vs. UNION OF INDIA & OTHERS (2003 (2) TMI 46 - CALCUTTA High Court ) and the Third Member decision of this Tribunal by the Ld. CIT(A) and also by the Ld. AO automatically results in mistake apparent on record, which ought to have been rectified u/s. 154 of the Act by the Ld. AO and the Ld. CIT(A). Hence, we have no hesitation in allowing the ground raised by the assessee. The aforesaid decision will apply in all the other appeals of the assessee.- Decided in favour of assessee
Issues Involved:
1. Eligibility for exemption under Section 10(10C) of the Income-tax Act, 1961. 2. Scope of rectification under Section 154 of the Income-tax Act, 1961. 3. Interpretation of Rule 2BA of the Income-tax Rules, 1962. 4. Applicability of judicial precedents in rectification petitions. Issue-wise Detailed Analysis: 1. Eligibility for exemption under Section 10(10C) of the Income-tax Act, 1961: The primary issue was whether the assessee was entitled to an exemption of ?5,00,000/- under Section 10(10C) of the Income-tax Act for the Voluntary Retirement Service (VRS) benefits received from the Hongkong and Shanghai Banking Corporation Ltd. The Assessing Officer (AO) denied the exemption on the grounds that the VRS amount exceeded the limit prescribed under Rule 2BA of the Income-tax Rules. The AO calculated the permissible amount based on the basic pay and remaining months of service, concluding that the received amount exceeded this limit, thus disqualifying the assessee from the exemption. 2. Scope of rectification under Section 154 of the Income-tax Act, 1961: The assessee filed a rectification petition under Section 154, arguing that there was a mistake apparent on record in the AO's assessment. The AO dismissed the petition, stating that Section 154 is confined to rectifying mistakes apparent from the records and does not cover errors of judgment. The CIT(A) upheld this decision, stating that the AO had already considered the relevant facts and laws in the original assessment, and any amendment would be outside the ambit of Section 154. 3. Interpretation of Rule 2BA of the Income-tax Rules, 1962: The CIT(A) emphasized that for the exemption under Section 10(10C) to apply, the VRS scheme must conform to Rule 2BA. The AO had previously determined that the VRS scheme of HSBC did not meet the requirements of Rule 2BA, which was not contested by the assessee during the rectification or appellate proceedings. The CIT(A) concluded that the issue was debatable and outside the scope of Section 154. 4. Applicability of judicial precedents in rectification petitions: The assessee cited several judicial precedents, including decisions by the ITAT and the Calcutta High Court, which favored the interpretation of Section 10(10C) in a manner beneficial to the employee. The CIT(A) rejected the rectification petition, stating that all relevant points and case laws had been considered in the original appellate order, and the rectification application was an attempt to review the order, which is not permissible under Section 154. Tribunal's Decision: The Tribunal noted that the Calcutta High Court in the case of SAIL DSP VR Employees' Association had held that the provisions of Section 10(10C) should be interpreted beneficially for the employee. Additionally, the Tribunal referenced its Third Member decision in the case of Krishnagopal Saha, where it was held that even if a VRS scheme did not conform to Rule 2BA, the exemption under Section 10(10C) could still be granted to the extent of ?5,00,000/-. The Tribunal also cited the Supreme Court's decision in Saurashtra Kutch Stock Exchange Ltd., which held that non-consideration of a jurisdictional High Court's judgment is a mistake apparent on record that can be rectified under Section 154. Conclusion: The Tribunal concluded that the provisions in the Rules cannot override the Act, and the assessee should be granted the exemption under Section 10(10C) to the extent of ?5,00,000/-. The non-consideration of the relevant judicial precedents by the AO and CIT(A) constituted a mistake apparent on record, warranting rectification under Section 154. Consequently, the Tribunal allowed the appeals of the assessee. Result: All appeals by the assessee were allowed, and the order was pronounced in the open court on 01.06.2016.
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