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TMI Blog2003 (2) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... k place and chargeable to tax under section 15 clause (a), of the said Act, whether paid or not. If the payment is spread over for a period, according to the scheme, it would not be chargeable to tax bereft of clause (10C) of section 10 because of its payment even at subsequent assessment years than the assessment year for which it had become due, but not paid. He has referred to section 43(2) of the said Act and pointed out that the word "paid" includes incurring of the liability to pay. He further contends that the scheme under which the voluntary retirement had taken place is commensurate with the scheme provided in rule 2BA of the Income-tax Rules, 1962. There is no conflict or friction between the said rule and the scheme formulated. As such to the extent of rupees five lakhs the employees opting under the scheme are entitled to exemption of tax in terms of sections 10(10C). Therefore, the amount paid under the scheme represents the amount contemplated under clause (10C) and assumes the character of salary or benefit in lieu of salary as defined in section 17, clauses (1) and (3), respectively, and are chargeable under section 15, clause (a), as soon it was due though not paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. and in some case 80 per cent. and includes leave, gratuity and other benefits. Therefore, it cannot be construed to be the payment receivable on account of voluntary retirement. On the other hand, these are payments in lieu of those components. This would definitely make the said payment "salary" within the meaning of section 17(1) or benefit in lieu of salary within the meaning of section 17(3), as the case may be. He has adopted the arguments made by Mr. Banerjee and has elaborated the same. We need not repeat his submissions since the crux of his submissions is already noted. The last contention that was suggested by Mr. Some was with regard to the second proviso to section 10(10C), which makes the benefit available once in one assessment year and not allowable in any subsequent assessment year. Therefore, according to him, when the payment is stretched over a period of years even if the benefit is available, it would be available only for the assessment year following the voluntary retirement. It cannot be stretched over to any other assessment year. Therefore, the payment that has been spread over a period of years is liable to be taxed under section 15, clause (a), of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 4.1(i), indicates that the monthly benefit would be an equivalent of specific percentage of the basic pay and dearness allowance on the date of voluntary retirement and it shall be payable for a period of ten years or till attainment of 58 years of age, whichever is earlier. But, in our view, this provision itself makes it clear that it is not in conflict with the requirement in clause (vi) of rule 2BA. Inasmuch as requirement clause (vi) provides that the amount payable shall not exceed the amount equal to three months' salary for each completed year of service or salary at the time of voluntary retirement multiplied by the balance months of service left till the date of retirement or superannuation in due course. If the left over service is more than ten years, then the amount paid cannot exceed the amount payable at salary payable at the time of voluntary retirement multiplied by the months of service left. At the same time, if it is less than ten years, in that event, an employee is liable to get the benefit till he is 58 years of age which would be exactly the left over months of service the multiplying factor of the basic plus dearness allowance payable on the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, rule 2BA, which was inserted by the Income-tax (Sixteenth Amendment) Rules, 1992, was amended from time to time. All these go to show that this was intended to make the voluntary retirement more attractive and beneficial to the employee opting for voluntary retirement. Therefore, this has to be interpreted in a manner beneficial to the employee opting for voluntary retirement, if there is any ambiguity. Therefore, while searching for the meaning of the word "amount received" used in section 10(10C), we are to look into the section itself and rule 2BA as well. Rule 2BA prescribes the limit. Initially, it was one and one half month's salary for each completed year of service since amended to three months' salary for each completed year of service or the salary for the months remaining after voluntary retirement till retirement. This clearly indicates that it is only the compensation part payable on account of cessation of employment, which is the amount intended in section 10(10C), inasmuch as, on the date an employee opts for voluntary retirement, he is already entitled to the accumulation of the provident fund in his account governed by the Provident Funds Act and the scheme, gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onthly benefit provided in clause 4.1(i) of the scheme, as is the case with regard to clause 4.1(iv), (v) and (vi) of the scheme. It is only the monthly benefit provided under clause 4.1(i) of the scheme that represents the amount exempted under section 10(10C). The amounts mentioned in clause 4.1(ii), (iv), (v) and (vi) were already payable. The employee would have been entitled to them irrespective of voluntary retirement on termination of or superannuation from service, except in the case of dismissal in which case the gratuity under clause (iv) and medical benefit under clause (v) would not be payable. Therefore, the amounts payable under the scheme other than those under clause 4.1(i) are salary, etc., within the meaning of section 17(1) or (3), as the case may be, and not an amount receivable under a voluntary retirement scheme. That apart, upon voluntary retirement, the employee is deprived of further benefit of service including the leave or gratuity that would have accrued to him after such retirement if he had continued in service and that the said amount is being paid on account of retirement since preponed by reason of option for voluntary retirement. Therefore, by no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the liability as well. Whereas section 15(a) provides chargeability of salary to tax as soon it becomes due, though not paid. As soon the salary becomes due, the incurring of the liability is complete. As soon the liability is incurred, it becomes a deemed payment in view of the definition of "pay" defined under section 43(2). In the present case, though the amount of monthly benefit paid under clause 4.1(i) of the voluntary retirement scheme consists of salary or benefit in lieu of salary as defined in section 17(1) or (3), read with section 43(2), but the same is exempted from tax by reason of section 10(10C). This amount became chargeable under section 15(a) as soon as it became due, though not paid. Under the scheme the liability to pay was incurred and the amount became payable at the time when the employee was released having opted for the voluntary retirement under the scheme. Therefore, this is an amount, which is receivable by the employee at the time of voluntary retirement according to the scheme and became chargeable to tax under clause (a) of section 15, even though not paid. Therefore, to the extent of rupees five lakhs, the said amount is exempted from being charg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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