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TMI Blog2006 (3) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... sees claimed exemption of Rs. 5 lakhs out of these amounts under section 10(10C) and on the balance claimed relief under section 89(1). According to the Assessing Officer, the claim of the assessees was excessive within the meaning of section 147 of the Act, in consonance with Explanation (2)(b)/(2)(c ) of section 147. Notice under section 148 was issued. Also notices under sections 143(2) and 142(1) were issued calling for any objections if at all. The relevant sections/Rules discussed by the Assessing Officer read as under :-- "Section 89 (as amended by Finance Act, 2002 with retrospective effect from 1-4-1996). Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, of salary for more than twelve months or a payment which under the provisions of clause (3) of section 17 is a profit in lieu of salary, or is in receipt of a sum in the nature of family pension as defined in the Explanation to clause (4)(iia) of section 57, being paid in arrears, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer shall, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter including the taxable compensation and average of the tax payable for three preceding years, after adding to each of the years 1/3rd of the additional compensation. The difference is the relief admissible. If taxable portion of compensation or ex gratia is allowed relief under section 89, the assessee is allowed benefit by way of reduced tax on the taxable compensation or ex gratia. 6. In support of the claim, assessees relied upon the decisions of the Hon'ble Madras High Court in the case of CIT v. J. Visalakshi [1994] 206 ITR 5311 and in the case of CIT v. M. Raman [2000] 245 ITR 8562. Assessing Officer held the judgments were relevant for the assessment year 1982-83 and not for the years under consideration. Consequently, the Assessing Officer disallowed the claim of the assessees for relief under section 89 in respect of taxable portion of the compensation or ex gratia. Aggrieved by the above order, assessees approached the first appellate authority. 7. Before the CIT(A), it was contended, Assessing Officer failed to appreciate that section 89 and Rule 21A provides for relief even for any payment, which under the provisions of clause (3) of section 17 is a profit in lieu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other company at the time of voluntary retirement, in accordance with any scheme or schemes of voluntary retirement was exempt from income-tax. Representations had been received on behalf of the employees of statutory authorities, etc., that the benefit of the income-tax exemption under section 10(10C) should be extended to them. The rationale for providing income-tax exemption on the amounts received under the schemes of voluntary retirement by the employees of the companies, i.e. making such schemes more attractive so that the companies can improve their efficiency, equally applies in the case of statutory authorities and local authorities. The scope of the income-tax exemption under section 10(10C) has, therefore, been extended to cover thereunder the employees of an authority established under a Central, State or Provincial Act or of a local authority. The guidelines prescribed by the Board specify that the amount receivable on account of voluntary retirement of an employee should not exceed five hundred thousand rupees. The intention was to restrict the benefit of income-tax exemption under section 10(10C) to the aforesaid amount in the case of an employee. The Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reiterated that the compensation received under VRS cannot be distributed in more than one assessment year. He held, this only means that if an employee has availed exemption under section 10(10C), then he cannot have any exemption for any other year. He held, this is a benevolent Circular. Hence, relying upon the following the decisions of the Hon'ble Supreme Court, the CIT(A) ruled the issue in assessee's favour, holding that the benevolent Circular is binding upon the tax authorities :-- (1)Navneet Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 (SC) (2)Ellerment Lines Ltd. v. CIT [1971] 82 ITR 913 (SC) (3)K.P. Verghese v. ITO [1981] 131 ITR 597 (SC) (4)C.B. Gautam v. Union of India [1993] 199 ITR 530 (SC) (5)UCO Bank v. CIT [1999] 237 ITR 889 (SC) 12. Coming to the issue, whether it is to be treated under section 17(3), CIT(A) held, this clause describes the payments, which are considered to be profits in lieu of salary. Assessees also relied upon the decision of the Tribunal, Mumbai Bench, in the case of ITO v. Smt. Sandhya Nitin Gupte [IT Appeal No. 3422 (Mum.) of 2004, dated 30-8-2004] and the decisions of the Hon'ble Madras High Court cited supra. Aggrieved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts in the case of P. Surendra Prabhu (supra) briefly, it is as under :-- "Salary : Exemption under section 10(10C) and relief under section 89 of the Income-tax Act, 1961 : AY 2001-02 : Compensation on termination of service : Entitled to exemption 10(10C) : Unexempted portion entitled to relief under section 89. The assessee was an employee of Canara Bank, a nationalized bank. The assessee offered for voluntary retirement from service under the scheme floated by the bank. On acceptance of the offer, the assessee received the full and final settlement of ex gratia payment and other benefits as per the scheme from his employer. In the return of income filed for the assessment year 2001-02, the assessee claimed exemption to the extent of Rs. 5 lakhs received under the voluntary retirement scheme from his employer, under section 10(10C) of the Income-tax Act, 1961 and also relief under section 89(1) of the Act in respect of the amount received in excess of Rs. 5 lakhs from his employer. The assessee's claim was rejected by the Assessing Officer. The CIT(A) and the Tribunal allowed the assessee's claim for relief under section 89(1). On appeal, the Karnataka High Court upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X
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