9911796707
TMI Blog2005 (12) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) is admissible after the grant of exemption under section 10(10C)(viii) of the Income-tax Act is the question that arises for consideration in these cases. The petitioners were officers and employees of the State Bank of Travancore who had availed of the benefit of the Voluntary Retirement Scheme (in short VRS) framed by the bank in accordance with the guidelines prescribed under rule 21A of the Income-tax Rules. Altogether 915 employees had opted for the benefit of the scheme and retired from service with effect from March 31, 2001. The bank had deducted at source the income-tax on the taxable income for the year 2000-01 after excluding rupees five lakhs under section 10(10C)(viii) of the Income-tax Act. After excluding that amount the bank arrived at the tax payable by each of the employees taking into account the allowances and reliefs and such other deductions under Chapter VI-A to Chapter X. The employees who took voluntary retirement therefore were found entitled to relief under section 89(1) of the Income-tax Act in respect of the payment under the provisions of clause (3) of section 17. The employees later filed their return for the assessment year 2001-02 to the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of clause (3) of section 17 of the Act. Senior counsel appearing for the Income-tax Department, on the other hand, contended that relief under section 89(1) read with section 17(3) of the Act applies only in the case of termination of service of an employee. Counsel submitted that the amount is received in connection with the termination of employment is a capital receipt and in the nature of retrenchment compensation and not a profit in lieu of salary. Counsel submitted that relief under section 89(1) can be claimed only when portion of the assessee's salary is received as arrears or in advance for a period of more than twelve months in a financial year or the amount received is a profit in lieu of salary under section 17(3). Counsel further submitted that relief under section 89(1) is admissible only when compensation is received in connection with the employment and in the case of voluntary retirement there is no termination of employment. The question that falls for consideration in these cases, as we have already indicated, is whether ex gratia compensation received by the petitioners on their voluntary retirement as per the voluntary retirement scheme is entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed to mitigate hardship that may be caused on account of the high incidence of tax due to progressive increase in tax rates. Hence, we entirely agree with the view taken by the Income-tax Tribunal." We are in this case also concerned with the question as to whether the employee who has taken retirement under the voluntary retirement scheme is entitled to get relief under section 89(1) read with section 17(3)(i) of the Income-tax Act. Senior counsel appearing for the Revenue submitted that the relief under the abovementioned provision would be available only with regard to the compensation received by an employee in connection with the termination of the employment and not in a case where compensation is received by way of voluntary retirement. Counsel submitted that the Legislature is well aware of the distinction between the expressions "voluntary retirement", "termination of employment" and "retirement" when it used the expression "voluntary retirement" under section 10(10C)(viii) of the Act. We may for easy reference extract the abovementioned provision. Section 10(10C)(viii) which stood at the relevant assessment year reads as follows: "10. Incomes not included in total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermination of his employment or the modification of the terms and conditions relating thereto; (ii) any payment [other than any payment referred to in clause (10), clause (10A), clause (10B), clause (11), clause (12), clause (13) or clause (13A) of section 10], due to or received by an assessee from an employer or a former employer or from a provident or other fund, to the extent to which it does not consist of contributions by the assessee or interest on such contributions or any sum received under a keyman insurance policy including the sum allocated by way of bonus on such policy: Explanation. - For the purposes of this sub-clause, the expression 'keyman insurance policy' shall have the meaning assigned to it in clause (10D) of section 10; (iii) any amount due to or received, whether in lump sum or otherwise, by any assessee from any person- (A) before his joining any employment with that person; or (B) after cessation of his employment with that person." Sub-clause (iii) of section 17(3) was inserted by the Finance Act, 2001 with effect from April 1, 2002. The Revenue has already raised a contention that since the term 14 "voluntary retirement" has not been used b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held that section 89(1) read with section 17(3) of the Act are beneficial clauses intended to grant certain benefits to employees or persons in service and therefore while placing interpretation on such clauses, the object with which such clauses are provided in the Act must be borne in mind, the object being to grant certain benefit to the person whose service is terminated. The court took the view that if the meaning of the word "termination" is confined to cases of voluntary retirement or superannuation only, the object of the clause will not be fully achieved and it would amount to restricting the scope of the beneficial clause. We are in full agreement with the reasoning of the Madras High Court in J. Visalakshi's case [1994] 206 ITR 531. The Madras High Court in CIT v. M. Raman [2000] 245 ITR 856, held that the Tribunal was right in holding that the amount received by the employee at the time of voluntary retirement of service would be regarded as salary and the relief under section 89 of the Act would be admissible in respect of the amount received by the assessee from his employer at the time of voluntary retirement. Similar is the view taken in CIT v. G.V. Venugopal [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
