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TMI Blog2023 (2) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, then there does not arise any question of tax for that amount. If the event of transaction is for A.Y. 2017-18 then also, the department should have given effect to the amount which is actually not part of the total income of the assessee. The amount which has already been refunded back cannot be brought within purview of tax since the chargeability to tax of such refunded amount does not arise. The assessee had made a refund of Rs. 80.5 lakhs on account of provisions contained in the confidentiality and noncompete agreement read with MOU between the assessee and Vedanta Ltd. and therefore, such refund cannot be construed as salary for the purpose of charging to tax. Such amount therefore, is not assessable as income. In view thereof, we set aside the order of the ld. CIT(A) and allow the grounds of appeal. X X X X Extracts X X X X X X X X Extracts X X X X ..... ave joined a competitor within the cool off period in contravention of the MoU with his previous employer which gave rise to a dispute. It is claimed that subsequent to an agreement reached with the previous employer i.e. Vedanta Ltd., the assessee was required to pay compensation of Rs.80,50,OOO/- to Vedanta Ltd. for breach of the terms of the Non-Compete Agreement. The assessee claimed that the compensation of Rs. 80,50,000/- paid back to Vedanta Ltd. has been reduced from the salary shown in the original return of income. However, the argument advanced by the assessee to support the reduction of income in the current year was found to be untenable as the documentary evidence furnished showed that the compensation was paid on 01-07-2016 pursuant to an MoU signed on 27-06-2016 (both falling in the subsequent F.Y. i.e. F.Y. 2016-17) and not in the year under consideration. 5. The ld. A.O observed and held as follows: "4. The submission of the assessee has been carefully examined with reference to the facts of the case and material on record. Sec.15 of the I.T. Act defines that any salary 'paid or allowed' tcraI18sseseee shall be chargeable to income-tax under the head &q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Tribunal. 7. We have perused the case records, heard the submissions and analyzed the facts and circumstances. In this case, the assessee is an individual previously employed with Vedanta Ltd. (hereinafter referred to as "the company) as a Chief Operating Officer in their Iron Ore business (previously known as Sesa Goa Ltd) which eventually got merged with Vedanta Ltd. The assessee had resigned from the said organization on medical grounds and considering the circumstances and long period of service, the company supported the assessee by way of exgratia/ severance/non-compete package of Rs. 2,01,09,000/-. For receiving this non-compete/severance package, the company and the assessee entered into a "Confidentiality and Non-Compete Agreement" dated 26th May 2015 wherein as per the covenant, the assessee agreed that 30 months from the date of relieving, the assessee shall not directly or indirectly on behalf of the company‟s competitive business perform the same or substantially the same job duties or otherwise be associated with any other business, etc. i.e. the same or similar to or competitive with the company……. . However, this clause was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n there would be no outstanding claims against each other on account of noncompete condition. 4. The panics represents that the,' have had II full and complete opportunity to consult ; with their respective legal counsel prior to signing of Ibis MOU. 5. In the event that PRAMOD for any reason whatsoever, fail, neglects or do not refund the agreed amount within 30 days from the dale of this MOU. this MOU shall have no effect and the Parties shall be tree to claim all their rights and contentions under the CNC A and al/ other prior agreements between the Parties herein Executed by the Parties on this 27th of June 2016. For Vedanta Ltd. Sd/- Pramod Muralidhar Unde 27/6/2016 Sd/- Kishor Kumar CEO - Iron Ore Business, Vedanta Ltd. " 8. The assessee had also submitted the copy of cheque issued to the company i.e. Vedanta Ltd., for Rs. 80.5 lakhs which is out of the non-compete/severance package of Rs. 2.01 crores which was paid to the assessee by his previous employer i.e. Vedanta Ltd. This is placed in the paper book filed by the assessee. The assessee has, in his original return of income included severance payment of Rs. 2.01 crores and declared the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot arise. 10. We find Hon‟ble Delhi High Court in the case of CIT Vs. Raghunath Murti (200) 178 Taxman 144 Del) on identical facts and circumstances has observed and held as follows: 4. "With regard to the proposed question (a), the factual background is that the assessee in his original return had declared an income of Rs. 26,81,110. This return was filed on 26-6-1988. revised return was filed on 16-8-1999 and the income returned was shown at Rs. ]6,64,000. The assessee had revised the returned income because the assessee had refunded a sum of Rs. 10,17,112 to his employer-company (M/s. Alcatel Modi Network Systems Ltd.). The said amount was refunded because the same was found to be excess amount paid to the assessee by way of remuneration. This resulted in the assessee revising his salary income to Rs. 8,58,217 as against the original returned salary income of Rs. 18,75,329. As per the revenue, the refund of the said sum of Rs. 10,17,112 cannot be treated as excess salary paid once the same had accrued to the assessee in the relevant year. The Assessing Officer, consequently, held that the refund of the said amount was not liable to be treated as reduction in the salary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s remuneration paid earlier to the assessee was required to be refunded to the company and it is in this background that the assessee refunded the amount of Rs.10,17,112. The said refund is also supported by the certificate of the employercompany as also the bank statement of the company for the relevant year. The Tribunal concluded, after noting the provisions of the Companies Act, 1956 as well as the resolutions passed in the AGMs indicated above, that the refund made by the assessee was on account of statutory provisions contained in the Companies Act, 1956. The further conclusion arrived at by the Tribunal was that the amount originally paid to the assessee over and above the limits prescribed in the Companies Act, 1956 could not even be construed as salary so as to fell within the fold of taxation under section 15 of the Income-tax Act, 1961. The Tribunal confirmed the conclusion of the Commissioner of Income-tax (Appeals) that the amount of Rs. 10,17,112 was not assessable as an income. 7. We have heard the counsel for the parties and have examined the facts as well as the legal position in detail and we find that the Tribunal has rightly confirmed the finding returned by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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