2023 (2) TMI 176 - HC - Income Tax

Revision u/s 264 - denial of benefit to the petitioner u/s 89 - HELD THAT - It is true that the revision application filed by the petitioner against the assessment order was rejected by the 1st respondent both on the point of delay as well as on merit but the fact remains that the core issue raised by the petitioner is now well settled and accepted by the Department itself. Submission of Mr. Prasad that the assessment order has become final cannot be accepted in as much as on filing of the writ petition and admission thereof, the assessment order became subject to outcome of the writ petition. In view of the decision of the CBDT as well as of this Court in M.V. Chinna Rao 2006 (10) TMI 519 - TELANGANA HIGH COURT we have no hesitation in holding that petitioner is also entitled to the benefit of Section 89 - Consequently, the orde passed by the 1st respondent as well as the assessment order passed by the 2nd respondent to the extent of denial of benefit to the petitioner under Section 89 of the Act are hereby set aside and quashed.

Summary

Issues:
1. Entitlement to benefit under Section 89(1) of the Income Tax Act.
2. Rejection of revision application under Section 264 of the Act by the 1st respondent.
3. Legal implications of the decision by the CBDT and the High Court in similar cases.

Issue 1: Entitlement to benefit under Section 89(1) of the Income Tax Act:
The petitioner, an individual assessee, received compensation post voluntary retirement from State Bank of Hyderabad. The petitioner claimed an exemption under Section 10(10C) of the Act for a portion of the compensation and treated the remaining amount as salary received in advance, seeking relief under Section 89 of the Act. The 2nd respondent, in the assessment order, questioned the petitioner's eligibility for further relief under Section 89 after claiming exemption under Section 10(10C). The 1st respondent, while dismissing the petitioner's application under Section 264 of the Act, upheld the 2nd respondent's decision. However, the High Court, considering previous judgments and the CBDT's decision, held that the petitioner is entitled to the benefit of Section 89 of the Act. Consequently, the orders denying the petitioner relief under Section 89 were set aside, and a refund was directed to be made by the respondents.

Issue 2: Rejection of revision application under Section 264 of the Act by the 1st respondent:
The 1st respondent rejected the petitioner's application under Section 264 of the Act, citing a delay in filing and on merit, upholding the 2nd respondent's assessment order. The rejection was based on the assessment order's well-reasoned nature and the lack of grounds to overturn it. However, the High Court, considering subsequent developments and legal precedents, found the petitioner's claim to relief under Section 89 valid, thereby overturning the decisions of the lower authorities.

Issue 3: Legal implications of the decision by the CBDT and the High Court in similar cases:
The High Court referred to a previous case where the question of entitlement to relief under Section 89 after claiming exemption under Section 10(10C) was addressed. In that case, the High Court ruled in favor of the assessee, establishing a precedent that further relief under Section 89 can be available post-exemption under Section 10(10C). The CBDT also clarified its stance on the issue, stating that relief under Section 89 would be applicable to payments received under voluntary retirement schemes. These decisions influenced the High Court's ruling in the present case, emphasizing the settled nature of the issue and the petitioner's entitlement to relief under Section 89.

This comprehensive analysis of the judgment highlights the key legal issues, the arguments presented by the parties, and the reasoning behind the High Court's decision in each aspect of the case.