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TMI Blog2008 (7) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing relief to the assessee under section 89(1) of the Act in respect of sum received under the VRS over and above a sum of Rs.5,00,000 which is not prescribed under section 89 (1) of the Income-tax Act nor under any of the prescribed categories as per Rule 2BA of Income Tax Rules, 1962. (d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in allowing relief to the assessee under section 89(1) of the Act when employer has not determined the amount of ex gratia and financial years to which it pertained." 2. Appeal admitted on the question of law as formulated above. 3. On behalf of Revenue it is sought to be submitted that the employees who had taken benefit of the scheme framed by R.B.I. are not entitled to the benefits under section 10(10C) of the Income Tax Act, Considering Rule 2BA of the Income Tax Rules. It is further submitted that the Assessing Officer took note of the Central Board of Direct Taxes Instructions dated 26th September/October, 2005 wherein Central Board of Direct Taxes has stated that the "Optional Early Retirement Scheme" (O.E.R.S.) introduced by the R.B.I. vide its Administrative Circular dated 11th Septe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luntary retirement or voluntary separation shall be exempt under clause (10C) of Section 10 only if the scheme of voluntary retirement framed by the aforesaid company or authority or Co-operative Society or University or Institute, as the case may be: (i) it applies to an employee who has completed 10 years of service or completed 40 years of age; (ii) it applies to all employees (by whatever name called) including workers and executives of a company or of an authority 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 retir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conditions of the guidelines prescribed under Rule 2BA are not complied with in the O.E.R.S. of the R.B.I. For the aforesaid reasons they allowed the Appeals. 10. Before answering the issue we may refer to some of the material which have been brought to our attention by the parties under the scheme as announced by Administrative Circular No.1 dated August 11, 2003 was applicable only those employees were eligible who have completed 25 years of full time regular service in the bank and have also completed 50 years of age as on 1st August, 2003. The ex gratia payment was equal to pay plus D.A. for the number of years of actual service rendered at 60 days for each completed year of service or part thereof in excess of six months or pay plus D.A. for remaining months of service reckoned upto the date on which the employee would retire on superannuation whichever is less. In the annual report for the year ending June 30, 2004 reference is made to the Optional Early Retirement Scheme, the relevant portion of which reads as under:- "Technological upgradation undertaken by the Reserve Bank towards streamlining the work in general and its core function i.e. currency management led to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16, 2008 it was again reiterated that the Bank has not made any recruitment against the vacancies caused by OERS. 13. Before introducing the scheme a note had been prepared by the Department of Administration and Personal Management which shows that as a result of closure of Note Examination Section and also on account of downsizing/reduction of staff in other areas due to computerization, mechanisation, simplification of processes and decentralisation, a sizeable number of employees in all classes are being/will be rendered surplus. This problem was faced by all the offices. While some other measures were being considered to tackle the problem of surpluses by redeployment, no easy and quick solution could be worked out to ensure gainful redeployment of such surplus staff. On the other hand, it was also not desirable to maintain a sizeable number of employees who are without work or underutilised. The problem was considered at a high level in the discussion with the Governor and it had been suggested that an open ended Early Retirement Scheme be introduced for employees who are 55 years of age and above. It is clear from this report prepared by the bank that employees had become s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rne in mind, particularly in a situation like this. With this perspective, keeping in view the true object of the impugned enactment, there is no doubt that employees of the private sector who are left out of the ambit of the impugned provision do not fall in the same class as employees of the public sector and the benefit of the fall out of the provision being available only to the public sector employees cannot be rendered the classification invalid or arbitrary. This classification cannot, therefore, be faulted." 15. It will, therefore, be clear that judicial notice was taken by the Supreme Court that the very object in enacting the provisions was to down size the employees strength so that unwanted personnel could seek voluntary retirement thereby enabling the public sector to achieve the true object for it was established. This would indicate that the provisions of Section itself contemplate a scheme whereby there has to be down sizing on account of surplus or the like. 16. The scheme of the Section, therefore, becomes apparent considering the object for which the amendment was introduced by Parliament. The object being to make the public sector undertakings to play their ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken by the employer. The scheme, therefore, was meant for an overall reduction in the existing strength of the employees. The third requirement is also, therefore, satisfied. The fourth requirement was the vacancy caused by the voluntary retirement or voluntary separation is not to be filled up. We may firstly note that a finding of fact has been recorded by the Tribunal on that count which is not challenged before us in terms of the questions of law as framed by the revenue. Secondly there was material on record which shows that the scheme basically was to reduce the employee strength as posts had become surplus on account of reorganisation. One cannot fill in the posts which have become surplus as the posts have become redundant. Also additional evidence taken on record under Section 260A(7) would show that none of these posts from the day the scheme came into force till 2008 have been filled in. In other words the fourth requirement has also been satisfied. In so far as the fifth requirement is concerned, the Tribunal has already answered the issue and that finding of fact is not in issue before us. Even otherwise considering that the R.B.I. is a statutory body created under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the predicates of the Rule have been satisfied. The Supreme Court in Commissioner of Income Tax vs. Gwalior Rayon Silk Mill Manufacturing Co. Ltd. [1992] 196 ITR 149(SC) has observed as follows (page 156): "Logic alone will not be determinative of a controversy arising from a taxing statute. Equally, common sense is a stranger and an incompatible partner to the Income-tax Act. It does not concern itself with the principles of morality or ethics. It is concerned with the very limited question as to whether the amount brought to tax constitutes the income of the assessee. It is equally settled law that if the language is plain and unambiguous, one can only look fairly at the language used and interpret it to give effect to the legislative intention. Nevertheless, tax laws have to be interpreted reasonably and in consonance with justice adopting a purposive approach. The contextual meaning has to be ascertained and gives effect to. A provision for deduction, exemption or relief should be construed reasonably and in favour of the assessee. The object being that, in computation of the net income, the statute provides deductions, exemptions or depreciation on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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