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TMI Blog2022 (4) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly in the case of the assessee it was determined. The company after considering that these are one time lumpsum ex-gratia amount payable to the employee and settled the same after deducting the TDS as per the provision u/s.192. We observe from the record that company in the supplementary agreement has explained that the one time lumpsum ex-gratia amount is salary paid to the ex-employee in advance and accordingly, it has deducted tax at source in accordance with the provisions of the I.T. Act. In this regard the company also issued Form 16 to the assessee for the relevant year 2016-17. On careful consideration of the facts on record we observe that even though the textile unit was closed on 2008 and assessee has refused to agree the voluntary retirement scheme offered by the company and under protest assessee and similar employees managed to get compensation through Labour Commissioner and as per the directions of the Labour Commissioner, as agreed by the company, the assessee was awarded the compensation for the remaining period of service till the age of 63 years. The basis of compensation calculated by the company and the company also treated the one-time compensation as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company in its application to the Labour Commissioner inter-alia offered to pay an ex-gratia amount of compensation to each of the 275 employees provided they accept the closure and termination of their services without agitating the issue or obstructing the development of the entire Mill land. The company offered to earmark a piece of land admeasuring 1.08 acres out of the total Mill land which would not be developed or otherwise dealt with till the entire amount of all the employees have been paid. 3. The above said application was decided by the Labour Commissioner vide his order dated 11.01.2008 granting permission to the company to close down its Textile Mill Unit at Worli. Accordingly, by notice dated 12.01.2008, unit was closed down and services of all the 275 employees terminated w.e.f 12.01.2008. The Government of Maharashtra vide letter no TPB-4308/317/CR/182/08/UD011 dated 30.09.2008 addressed to Municipal Corporation imposed the following conditions on the company, to safeguard the interests of the 275 workers who had not opted for voluntary retirement scheme. i. The plot measuring 1.08 acres was to be reserved for the 275 ex-workers till the last of these wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is deemed salary paid to an exemployee in advance within the meaning of the provisions of the Act, it has therefore, deducted tax at source in accordance with the relevant provisions of the income tax act, 1961, as stated above. Form 16 has been duly issued to the assessee by the Company for the relevant F.Y 2016-17 certifying deduction of tax. In the return of income for the A.Y 2017-18, the assessee has claimed relief u/s.89(1) of the I.T.Act, 1961 on the compensation received by him, duly uploading Form 10E along with the ITR filed on the e-filing site. The total income declared is ₹.61,13,070/- with tax of ₹.16,94,639/-. Relief u/s.89(1) has been claimed as ₹.16,74,250/-. The assessee has also submitted the computation chart of the compensation as provided by the Company. As per the computation chart, for F.Y. 2016-17, the assessee received monthly payment as per the terms of agreement dated 26.02.2010. For the month of November 2016, a total amount of ₹.59,61,483/- is shown. The chart also gives a year-wise break-up of the computation of the lumpsum amount, on the basis of amount payable to the assessee from F.Y 2016-17 till F.Y 2036-37, when he attai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g income tax of ₹ 16,94,639/- as per the provisions of Section 192 of the Income Tax Act, 1961. The Company in the said agreement has explained that the one time lump sum ex-gratia amount is deemed salary paid to an exemployee in advance within the meaning of the provisions of the Income Tax Act, 1961, it has therefore, deducted tax at source in accordance with the relevant provisions of the Income tax Act, 1961. 10.1 According to the assessee, the amount is advance salary for the period 2017-18 to 2036-37, till the employee attained 63 years of age. The assessee also submits that even though the assessee vide agreement dated 22/2/2010 agreed to termination of employment, it was subject to him receiving compensation by way of salary plus DA upto the age of 63 years, The amount paid represents salary received for future years in advance. As the entire salary for future years has been received in the current year, it has been offered to tax. If the amount had been received in installments every year, he would have offered the same to tax in those respective years. Relief u/s 89(1) has been claimed for relief on account of the substantial tax burden due to the entire amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 1962 as computed by the assessee. Accordingly, the relief u/s 89(1) admissible in the case of the assessee is re-computed as ₹ 305397. 12. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) sustained the view of the Assessing Officer with the following observations: - 5.1 I have carefully considered the appellant submission and facts of the case. It is admitted fact that as per clause 4 of the supplementary agreement dated 25-11-2016, the Company has paid full and final settlements on account of ex-gratia payment to the appellant. It has been further stated in the said clause that no claim of ex-worker would lie against the company towards any remuneration, compensation, ex-gratia and any other benefits. Thus, the services of the ex-workers stood terminated with the closure of the Company since 12-01-2008. In these circumstances the ex-gratia payments received by the appellant is in the nature of compensation on termination of employment and accordingly relief under section 89(1) shall be computed as per the provision of Rule 21A sub-rule (4) of the Income tax Rules, 1962. 5.2 The appellant has placed his reliance on the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case law filed before Ld.CIT(A) and further relied on two case law which are reproduced below: - a) V.D. Talwar v. CIT [1963] 49 ITR 122 (SC). b) Patil Vijaykumar v. CIT in writ petition nos. 4916 to 4936 of 1984 dated 10.08.1984. He submitted that the above said case law are exactly similar to the facts of the assessee s case. 15. On the other hand, Ld. DR submitted that assessee is an ex-employee and received the compensation as ex-gratia as per the letter issued by the company. It clearly indicates that it is only a compensation not advance salary, in this regard she relied on the finding of the Ld.CIT(A) and brought to our notice Para No 5.1 of the order of the Ld.CIT(A). 16. Considered the rival submissions and material placed on record, we observed from the record that assessee is one of the employee who did not agree for the voluntary retirement scheme offered by the company and subsequently company has pledged a piece of land for the benefit of 275 employees who are not agreed for the voluntary retirement scheme compensation. Subsequently owing to the order of the Labour Commissioner and Municipal Corporation of the Greater Mumbai which imposed certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premature termination some remuneration was paid for services up to November, 1937 and a sum of pound 4,000 was paid as compensation for the loss of the employee's right to future remuneration under the earlier agreement of 1935. In these circumstances it was held that the sum of pound 94,000 was received by the respondent of that case not under the contract of employment nor as remuneration for services rendered or to be rendered but as compensation for giving up a right to remuneration. We are unable to see how that decision is of any help to the appellant in the present case. It seems clear to us that in the present case the appellant has surrendered no rights under the contract; what has been paid to him has been paid under the terms of contract and as salary which he would have earned if twelve months' notice had been given to him. As no notice was given he was treated as though he was in service and entitled to salary for twelve months and that was what was paid to him. It is difficult to see how such payment can be treated as compensation for loss of office. The present case is similar to the two cases of Henry v. Arthur Foster and Henry v. Joseph Foster [1932] ..... 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