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TMI Blog2007 (12) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... inion of the Chartered Accountants cannot be the sole basis for denying assessee's claim under section 10(10C) of the Act. Accordingly, the ld. AM held that assessee is entitled to exemption under section 10(10C) of the Act. Third Member - ITAT Mumbai Benches has considered similar issue in group cases of 222 assessees who also took Voluntary Retirement from RBI under the same scheme in Vaishali A. Shekar v. Asstt. CIT [ 2007 (3) TMI 293 - ITAT BOMBAY-K] held that; '' Neither the opinion of the Chartered Accountants nor the views of the RBI will finally determine the fate of exemption that is claimed under section 10(10C) but the satisfaction of the conditions or guidelines laid down by the Income-tax Rules, 1962. A plain reading of section and guidelines of Rule 2BA shows that the scheme in question leaves no doubt in our minds that the sums in question are already exempt under section 10(10C) of the Act up to the extent of Rs. 5 lakhs. No contrary decision is brought to my knowledge. Thus, agree with the ld. AM and hold that the assessee is entitled for exemption under section 10(10C) of the Act amounting to Rs. 5 lakhs out of sum of Rs. 13,52,784 received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee and added the same to his income under section 17(3) of the Act. The assessee filed appeal before the first appellate authority. 4. The learned Commissioner of Income-tax (Appeals) has also confirmed the action of the Assessing Officer in denying claim of exemption under section 10(10C) of the Act to the assessee. Hence the assessee is in further appeal before the Tribunal. 5. During the course of hearing, the learned authorised representative of the assessee submitted that basic idea of bringing scheme by the Reserve Bank of India is to reduce the number of its staff to make undertaking economically viable. He submitted that about 4,000 employees of the Reserve Bank of India opted this OERS and it resulted reduction in total number of staff strength. He further submitted that the Reserve Bank of India had written a letter dated August 31, 2005, that its scheme of early retirement did not fulfil guidelines laid down in rule 2BA of the Income-tax Rules on the basis of opinion received from M/s. Choksi and Co. chartered accountants. He submitted that OERS of the Reserve Bank of India substantially fulfilled the requirements of rule 2BA of the Income-tax Rules and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has to be interpreted liberally so as to advance objective of the provision and not to frustrate it. The learned Departmental representative submitted that there is no ambiguity in the guidelines as provided under rule 2BA of the Income-tax Rules for allowing exemption under section 10(10C) of the Act, the question of ambiguity does not arise and hence the said cases as cited by the learned authorised representative of the assessee are not relevant. 7. We have carefully considered the submissions of the learned Departmental representatives of the parties and the orders of the authorities below. We have also considered the relevant provisions of the Income-tax Act, 1961, specially section 10(10C) of the Act and rule 2BA of the Income-tax Rules and have also perused the cases cited by the learned authorised representative of the assessee. At the outset, we agree with the learned Departmental representative that cases cited by the learned authorised representative of the assessee (supra) are not relevant to the facts of the case before us. There is no dispute to the fact that there is no ambiguity in the provisions of section 10(10C) of the Act as well as in rule 2BA of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Reserve Bank of India viz., OERS fulfils the guidelines laid down in rule 2BA of the Income-tax Rules. We observe that the Reserve Bank of India vide its letter dated August 31, 2005, has itself stated that the ex gratia amount paid under its OERS scheme does not qualify for exemption under section 10(10C) of the Act as its OERS is not in the nature of voluntary retirement as per guidelines in rule 2BA of the Income-tax Rules. The learned Commissioner of Income-tax (Appeals) has also reproduced the relevant extract of the said letter dated August 31, 2005, received from the Reserve Bank of India in paragraph 6 at pages 4 and 5 of the paper book which reads as under : The bank' s OERS did not fulfil the guidelines laid down in rule 2BA of the Income-tax Rules arid hence the amount of ex gratia paid under the scheme was subject to deduction of tax thereon at source and the same was deducted accordingly as per terms and scheme (please see clause 6 of the scheme enclosed to A.C. No. 1). Further, the ex gratia paid under the scheme does not qualify for the exemption under section 10(10C) of the Income-tax Act for the following reasons : (a) Clause (i) of rule 2BA sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view taken by him. 13. The facts have been stated by the learned Judicial Member and therefore, do not require any further elaboration. The issue is whether the assessee was entitled to exemption under section 10(10C) of the Act amounting to Rs. 5 lakhs or not. The denial of exemption by both the lower Revenue authorities as well as by the learned Judicial Member is on the ground that the Optional Employees' Retirement Scheme (OERS) framed by the Reserve Bank of India was not in accordance with the requirements of rule 2BA of the Income-tax Rules as was confirmed by the Reserve Bank of India itself. The Assessing Officer has primarily held that clauses (iii) and (iv) requirements of rule 2BA had not been fulfilled. Clauses (iii) and (iv) requirements of rule 2BA are as under : (iii) the scheme of voluntary retirement or voluntary separation has been drawn to result in overall reduction in the existing strength of the employees. (iv) the vacancy caused by voluntary retirement or voluntary separation is not to be filled up. 14. In the present case, the entire thrust is on the issue whether the scheme framed by the Reserve Bank of India was in consonance with the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of 1999, dated February 24, 2003 (sic). 15. Learned counsel has relied on the following documents to submit that the Reserve Bank of India' s scheme substantially complied with the requirements of rule 2BA : 1. Copy of the extract from OERS analysis as issued by the Reserve Bank of India (OERS Special Issue /2004) 2. Copy of the extract from the annual report of the Reserve Bank of India from the chapter Human Resources Development and Organizational matters page 101/102/103. 16. In this regard, learned counsel has also referred to the order of the Commissioner of Income-tax (Appeals)-XIV, Kolkata, dated August 12, 2005 in the appeals filed by 46 ex employees of the Reserve Bank of India as contained at pages 33 to 78 of the paper book, wherein similar issue was involved and the same scheme was considered by the learned Commissioner of Income-tax (Appeals), who after considering the detailed sub-missions of learned counsel, held that the scheme framed by the Reserve Bank of India was in conformity with the requirements of rule 2BA. 17. I reproduce the extracts from paragraph 8 of the above order which are relevant in the present case : A. Statutory guideli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are published by the press relation division of the Reserve Bank of India. My attention was also drawn to the newsletter Vol. 29, No. 9 dated November 15, 2003, wherein it has been particularly stated by the authorities that ' the introduction of the OERS and the consequent reduction in the staff strength has thrown up new challenges' and the Regional Offices/ Central Office have to embark on work process re-engineering and job realignment to cope up with the situation in post OERS scenario. It is claimed that the OERS confirms to the rule 2BA(iii). Reliance was also placed on the submission to the effect that OERS in no way has any conflict with guidelines in clause (iii) of rule 2BA under the Income-tax Rules, 1962. (ii) The authorised representative Sri S. K. Chatterjee/T.K. Mitra, submitted that the real purpose behind the introduction of such a scheme involving early retirement in the present economic scenario is always to cause reduction in the staff strength irrespective of the language used for such retirement/separation in the related documents as no organization would offer voluntary retirement to its own staff if the employees were really needed in the organi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng its implied objectives is the reduction of manpower. In fact the annual reports and newsletters of the Reserve Bank of India have been repeatedly highlighting the resultant reduction of work force pursuant to the introduction of OERS. In my view, therefore, guideline in rule 2BA(iii) is broadly complied by the OERS of the Reserve Bank of India. A. Statutory guidelines rule 2BA(iv) : The vacancy caused by the voluntary retirement or voluntary separation is not to be filled up. B. Assessing Officer/Reserve Bank of India' s contention : The Reserve Bank of India has informed that it has not bound itself not to fill up the vacancies arising out of OERS. The bank reserves the right to make need based recruitment against such vacancies. C. Authorised representative' s comments : (i) Sri A. K. Ghosh, the authorised representative, pleaded that under sub-rule (iv) of rule 2BA it was not mandatory that the employer shall have to bound itself not to fill up the vacancy at any time in future. It merely meant that there should not be any scheme at the time of allowing retirement to bring in replacements either simultaneously or immediately thereafter. There coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk, a committee on job realignment/consolidation was constituted under the chairmanship of Sri A.V. Sardesai, executive director who after conducting a survey submitted its report. It was claimed that staff strength as on December 31, 2002 was 28,884 and that on June 30, 2003 was 28,254. There fore, 630 employees had already retired even before OERS scheme came into effect from August 1, 2003 and in place of them only 127 employees were recruited throughout the year. Nowhere in the annual report the authorised representative claimed that the Reserve Bank of India has stated that they have filled up 4,468 OERS vacancies with newly recruited employees. It was pointed out that OERS was effective from August 1, 2003 and actual vacancies arose much later after acceptance of the optee' s application but the bank filled only 127 posts during the entire period of January, 2003 to December, 2003. These recruitments, therefore, could not be said to be against the posts vacated by the employees opting for OERS as after posts got vacated, recruitment process starting with advertising the vacancies, calling applications, scrutinising the same for short listing etc., conducting interviews/se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he could not reopen the assessment over again to include the interest income. Thus, the legal position is very clear that even the wrong findings are binding between the parties inter se unless reversed in accordance with law. 20. When the Department has not preferred any appeal against the order of the learned Commissioner of Income-tax (Appeals), Kolkata then in principle, it has accepted the order and therefore, agreed that the scheme was substantially in conformity with the guidelines laid down under rule 2BA. Therefore, the Department cannot take a different stand in the present appeal. 21. In view of the aforementioned discussion, I set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to allow exemption under section 10(10C) to the assessee. 22. In the result, the assessee' s appeal is allowed. Order of Reference to Third Member 23. Since there is difference of opinion between the Members, who have heard this appeal, we, in terms of section 255(4) of the Income-tax Act, 1961, frame the following question and request the hon'ble President, Tribunal, for referring the same to the Third Member for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserve Bank of India on the opinion of the chartered accountants cannot be the sole basis for denying the assessee' s claim under section 10(10C) of the Act. Accordingly, the learned Accountant Member held that the assessee is entitled to exemption under section 10(10C) of the Act. 26. At the time of hearing before me, learned counsel for the assessee pointed out that several Benches of the Tribunal have decided identical issue and have held that the scheme of the Reserve Bank of India fulfils the requirement of section 10(10C) of the Act read with rule 2BA of the Income-tax Rules. He referred to the following decisions of the Income-tax Appellate Tribunal : S. No. I. T. A. No. In the case of Order dated 1. 2224/Kol/05 ITO v. Shri Sukdeb Halder, etc. 7-3-2006 2. 6384/M/06 and others (222 appeals) Vaishali A. Shelar v. Asst. CIT 28-3-2007 3. 471/MDS/06 and others Shri C. S. Subramanian v. Asst. CIT, etc. 30-4-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered similar issue in group cases of 222 assessees who also took voluntary retirement from the Reserve Bank of India under the same scheme in I. T. A. No. 6384/Mum/2006, etc. (supra). The Income-tax Appellate Tribunal considered the facts and the arguments of both the sides at length and concluded as under : Sums paid on voluntary retirement to the extent of rupees five lakhs are exempted from being charged to tax by reason of section 10(10C). Even if the payment is stretched over a period of years, the same could not become chargeable to tax in any subsequent assessment year. What is not otherwise taxable cannot become taxable because of admission of the assessee. Nor can there be any waiver of the right otherwise admissible to the assessee in law. The chargeability is not dependent on the admission of or waiver by the assessee. Chargeability is dependent on the charging section, which needs to be strictly construed. It may not be out of place to mention that the Calcutta High Court while dealing with the Writ Petition in 4957/W/2004 in its operative paragraph has expressed the following view : 'Prima facie, it appears that money received on account of voluntary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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