9911796707
TMI Blog2011 (12) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... made in regard to early bird incentives, the tax has been deducted by the company on such payments made and that tax is paid to the Government. - Assessee can not be treated as 'assessee-in-default' having regard to the principles laid down by this Court in Nestle India Pvt. Ltd. (2000 -TMI - 15273 - DELHI High Court) - ITA 728 OF 2011, ITA 729 OF 2011 - - - Dated:- 16-12-2011 - MR. JUSTICE SIDDHARTH MRIDUL, A.K. SIKRI, JJ. For Appellant: Mr. Kamal Sawhney, Advocate For Respondent: Mr. Ajay Vohra, Ms. Kavita Jha, Advs. These cases pertain to assessment year 2002-03. While carrying out the assessment, it had come to the knowledge of the Department that the assessee company had introduced voluntary retirement scheme during the year, in pursuance to which, as per the details filed, the assessee had paid a sum of Rs. 73.60 crore to the employees which had been amortized under Section 35 DDA of the Income Tax Act, 1961 (hereinafter referred to as the Act). On perusal of the Scheme, the assessing officer observed that the assessee company had paid certain additional benefits also alongwith VRS after analyzing the features of VRS and discussing the provisions of Section 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng officer to verify the veracity of the statement made by the assessee that wherever any payment was made in excess of Rs.5 lacs in regard to early bird incentive, the tax had been deducted on such payment and had been paid to the Government. Thus, it is not the case of the assessing officer that company had failed to deduct any pay and tax for good and sufficient reasons. Assessee had clearly demonstrated that it had good and sufficient reasons for non-deduction of tax for payment of VRS upto Rs.5 lacs. 4. Still not satisfied, the present appeal is preferred impugning the order of the tribunal. It is the submission of the revenue that the tribunal has not decided the real issue raised before it by the revenue and is guided by the mere fact that the assessee had not deducted tax at source on payment of VRS up to Rs.5 lacs for good and sufficient reasons. It is the submission that the real issue was that the scheme of voluntary retirement was not in conformity with Rule 2BA of the Income Tax Rules as the amount paid/payable under the scheme exceeded the amount equivalent to three months salary for each completed year of service and it exceeded Rs.5 lacs. Therefore, tax at sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r those provisions, the tax at source was required to be deducted. 6. In order to appreciate the aforesaid contentions, it would be necessary to first look into the relevant provisions which are Section 10(10C), 35DDA and 201 of the Act and Rule 2BA of the Income Tax Rules. The relevant portions of all these provisions are reproduced below: [(10C) any amount received [or receivable] by an employee of (i) a public sector company ; or (ii) any other company ; or (iii) an authority established under a Central, State or Provincial Act; or (iv) a local [authority ; or] [ (v) a co-operative society ; or (vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or (vii) an Indian Institute of Technology within the meaning of clause (g) of section 366 of the Institutes of Technology Act, 1961 (59 of 1961) ; or [(viia) any State Government; or] [(viib) the Central Government; or] [(viic) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng company, as they would have applied to the demerged company, if the demerger had not taken place. (4) Where there has been reorganisation of business, whereby a firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47 or a proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, the provisions of this section shall, as far as may be, apply to the successor company, as they would have applied to the firm or the proprietary concern, if reorganisation of business had not taken place. (5) No deduction shall be allowed in respect of the expenditure mentioned in subsection (1) in the case of the amalgamating company referred to in sub-section (2), in the case of demerged company referred to in sub-section (3) and in the case of a firm or proprietary concern referred to in sub-section (4) of this section, for the previous year in which amalgamation, demerger or succession, as the case may be, takes place. (6) No deduction shall be allowed in respect of the expenditure mentioned in subsection (1) under any other provision of this Act.]] XXX XXX XXX Consequences of failure to deduct or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of a co-operative society, as the case may be, excepting directors of a company or of a co-operative society;] (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 the voluntary retirement [or voluntary separation] is not to be filled up; (v) the retiring employee of a company shall not be employed in another company or concern belonging to the same management; (vi) the amount receivable on account of voluntary retirement [or voluntary separation] of the employee does not exceed the amount equivalent to [three months] salary for each completed year of service or salary at the time of retirement multiplied by the balance months of service left before the date of his retirement on superannuation: [Provided that requirement of (i) above would not be applicable in case of amount received by an employee of a public sector company under the scheme of voluntary separation framed by such public sector company.] Explanation : In this rule, the expression salary shall have the same meaning as is assigned to it in clause (h) of rule 2 of Part A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese employees, the income tax department clearly and unequivocally held that tax exemption under Section 10(10C) of the Act was available to the employees in respect in respect of VRS payments made under the VRS scheme. When this view is taken qua the employees at whose hands such payments are taken as taxable income beyond Rs. 5 Lakhs, the department cannot argue that no tax exemption under Section 10(10C) is at all available in respect of VRS payments made by the assessee to any of its employees and on this premise the Department could not allege that since the assessee did not deduct tax on this amount, it was to be treated as assessee-in-default‟. In the opinion of the CIT(A), this stand of Department was in total contrast and contradiction to the view taken by the department itself while making assessments in the cases of the employees. That apart, the CIT(A) also accepted the contention of the assessee that benefits which were payable to the employees under notice, namely, extra/additional payments if they opted for early retirement in the months of September and October, 2001, were subject to the unfettered and uncontrolled discretion of the management of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Only condition of Rule 2BA is that amount receivable should not exceed this limit. It was further held that Rule 2BA does not provide at all that the amount representing the lower of the two limits specified in clause (vi) of rule 2BA; amount upto Rs.5 lacs qualifies for exemption u/s 10(10C). From the above judgment of this Hon‟ble Court it is evident that payment upto Rs.5 lacs have to be allowed and given the necessary deduction. Assessee had submitted that wherever any payment is made in excess of Rs.5 lacs the payment on excess amount tax has been deducted by such companies and paid to the government. Hence Ld. Commissioner of Income Tax (Appeals) has directed the Assessing Officer to verify the quantum of such amount and ascertain that the TDS has been deducted as per the provision of relevant section and charge interest u/s 201(1A) for any delay or short deduction. We find that Ld. Commissioner of Income Tax (Appeals)‟s in his order in this regard is in conformity with the Hon‟ble Gujarat High Court decision cited above and it does not need to interfere in the same. 4.4 Another aspect which the Ld. Commissioner of Income Tax (Appeals) has addressed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Commissioner of Income Tax (Appeals) in this regard and uphold the same. 10. We are of the view that the aforesaid judgment of Gujarat High Court squarely covers the case in favour of the assessee. In that case, the Gujarat High Court observed that the emphasis in Rule 2BA is on the amount receivable on account of Voluntary Retirement Scheme, which should not exceed the limit prescribed therein and that it is not the intention of the legislature that every VRS framed by the companies must provide that an employee availing benefit of VRS would be paid an amount either equivalent to (1) three months‟ salary for each completed year of service; or (2) salary at the time of retirement multiplied by the balance months of service left before the date of his retirement on superannuation. 11. It was further observed that on construction of Rule 2BA, it is difficult to hold other manners/methods/made of payment of amount in the VRS framed by the companies are forbidden. The Court noted that if such a construction was to be adopted then the same would adversely affect several employees of several companies without any fault on their part and VRS would not be of benefit to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
