9911796707
TMI Blog1984 (11) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... ment would have taken place only on 1st April, 1985 subject to his having been found fit on 1st April, 1983 to continue for two more years. In consideration of his voluntary retirement and in pursuance of a scheme evolved by the company in this behalf and the practice followed in similar cases, the assessee was paid a sum of Rs. 21,088. The assessee claimed, that, only 1/3rd of this amount was assessable in each of the financial year 1980-81 to 1982-83. The ITO after reference to the certificate issued by the company in this behalf, which is in the following terms, held, that relief under s. 89(1) r/w s. 21A of the IT Act was not admissible in respect of this payment as such relief was applicable only to the case of an employee who has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder. The compensation paid to the employee at the time of his retirement was nothing but profits in lieu of salary covered by s. 17(1)(iv). Profits in lieu of salary have been defined in sub-s. (3) to include "the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or in modification of the terms and conditions relating thereto." Sec. 89(1) provides for relief in respect of a payment which under the provisions of cl. (3) of s. 17 is a profit in lieu of salary by virtue of the inclusion of which the income is assessed at a higher rate than that at which it would otherwise have been assessed. The relief to be allowed in this behalf is g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employer and not as a result of voluntary retirement. He held, that, the word "termination" would cover a case of voluntary retirement as well before the date of his superannuation. Accordingly, he directed the ITO to allow relief under s. 89(1) r/w r. 21A(1)(c) as applied in sub-r. (4)(a)(b). 5. Aggrieved with this decision of the AAC, the department is in appeal before us. The submissions made on behalf of the revenue are as under. No appeal has been provided under s. 246 against the refusal of the ITO to allow relief under s. 89. The assessee should have made an application for relief in this behalf before the ITO which he has failed to do. The assessee was not justified in returning only 1/3rd of the compensation received by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have simply to refer to s. 246 which in sub-cl. (c) of sub-s. (1) indicates, that, an assessee, objecting to the amount of income assessed or to the amount of tax determined, may file an appeal to the AAC. Sec. 89 clearly lays down, that, relief is admissible in a case where income is assessed at a rate higher than that at which it would otherwise have been assessed. Since the rate applied in a determining factor of the amount of tax determined, the assessee has undoubtedly a right of appeal under s. 246(1)(c) against the higher amount of tax determined. The relief provided for in r. 21A(4) is also quite explicit, in that, the average of the average rates of tax for the three previous years has to be applied determining the tax in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for misconduct." From the above it is clear, that the termination should be as a result of contract and it has absolutely no connection with the idea of punishment or misconduct which would be the case in the event of a termination by the employer. In the present case, the termination was as a result of voluntary retirement brought about in pursuance of a scheme of voluntary retirement which in other words, is a contractual termination. Once the compensation received is to be treated as profits in lieu of salary as per the definition in s. 17(3), s. 89 would automatically be attracted, as the same is made applicable to a payment which is treated as profits in lieu of salary under s. 17(3). Once this premise is granted, the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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