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TMI Blog2008 (2) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent in T. C. (A) No. 101 of 2007. A. Palaniappan for the respondent in T. C. (A) No. 419 of 2007. J. Balachander for S. Sridhar for the respondent in T. C. (A) No. 425 of 2007 C.V. Rajan for the respondent in T. C. (A) Nos. 1353 and 1397 of 2007. JUDGMENT The judgment of the court was delivered by K. RAVIRAJA PANDIAN J. - In these appeals, the Revenue assails the order of the Tribunal granting the relief of deduction under section 10(10C) of the Income-tax Act, 1961, to the respective assessees, who have severed their service connection from their employers the ICICI Bank and the Reserve Bank of India, under a scheme framed in the year 2003 called "ICICI Bank Early Retirement Option Scheme, 2003" and "Optional Early Retirement Scheme (OERS), 2003" respectively 2. Tax Cases (Appeals) Nos. 101, 410, 22, 425 and 1360 of 2007 relate to the employees of ICICI Bank and Tax Cases (Appeals) Nos. 1353 and 1397 of 2007 relate to the employees of the Reserve Bank of India. 3. As the relief sought for the contentions raised and the ultimate decision rendered are one and the same, except the assessees in each of the appeals, these appeals are taken togethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer afforded an opportunity to the appellant and required him to file copy of the scheme of ICICI Bank by which the appellant availed of voluntary retirement. The appellant has replied in writing that the scheme was not available to him. During the course of appellate proceedings, the appellant could not submit copy of scheme of voluntary retirement. In the circumstances, I find that the Assessing Officer has correctly denied the deduction under section 10(10C). The order of the Assessing Officer is confirmed." 6. On further appeal to the Tribunal, at the instance of the assessee, the Tribunal, after narrating the facts culminating the filing of the appeal before it, observed as under: "The Assessing Officer disallowed the claim of the assessee since the assessee had not filed the details of the Employees Retirement Option Scheme. The Commissioner of Income-tax (Appeals) also confirmed the order of the Assessing Officer on the same ground. Now, the assessee before us, during the course of hearing, filed a copy of the Early Retirement Option, 2003, from his employer ICICI Bank Limited, which is called as 'The ICICI Bank Early Retirement Option, 2003'. In this view of the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals), who by his order dated February 19, 2007, taking note of the letter of the Reserve Bank of India explaining the scope of the section and also taking note of the relevant clause in the scheme has ultimately held that the Assessing Officer was justified in denying exemption under section 10(10C) of the Act. The assessee carded the matter on further appeal to the Tribunal. 12. The Tribunal finding that the issue stood covered in favour of the assessee by the decision of the Tribunal rendered in the case of Vaishali A. Shelar [2007] 14 SOT 407 in I. T. A. No. 6384(Mum)/2006 held that the assessee was entitled to the relief under section 10(10C) in respect of the sums received under OERS up to a sum of Rs. 5 lakhs. That order is assailed before us by the Revenue by raising the following questions of law: "1. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the assessee is eligible for the benefit of section 10(10C), without even going into the details of the Early Retirement Option Scheme to see if it fulfils the criteria laid down for voluntary retirement schemes ? 2. Whether, on the facts and circumstances of the case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year ;" 15. The relevant statutory rule pertaining to the scheme is rule 2BA of the Income-tax Rules which reads as follows: "2BA.The amount received by an employee of- (i) a public sector company; or (ii) any other company; or (iii) an authority established under a Central, State or Provincial Act ; or (iv) a local authority, or (v) a co-operative society; or (vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (vii) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961) (viii) such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf, at the time of his voluntary 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-operativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICICI Bank Ltd. read as follows: "2. Need for introduction of the Scheme: The competitive landscape has been changing very rapidly particularly in the last couple of years. There has been paradigm shift in the competitive environment necessitating fresh look at the business strategies we adopt and implement. This leaves a significant impact on the way we do business, and all other components of the organization including its employees. A combative multi-prolonged strategy to out-execute competition is the need of the hour. Additionally, capability and skill enhancement of employees requires a priority attention. Appropriate response from employees is crucial for achieving the organizational goals. Some of our employees find the current environment too pressurizing. Many of them, who have been with the organization for a long period of time have regularly expressed a desire to have an early exit option. The scheme is being introduced in response to the competitive environment on the one hand and the desire of employees on the other." 18. The object for introduction of the Optional Early Retirement Scheme in the Reserve Bank of India, as set out in its Administration Circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirement of rule 2BA of the Income-tax Rules. The requirement of the statutory provisions is that the exemption from tax under section 10(10C) is available on the amount received under a scheme of voluntary retirement or a voluntary separation framed in accordance with the guidelines prescribed and specified in rule 2B. As the schemes had not been introduced for the purpose of making-over the reduction in the existing strength of the employees and do not provide that the vacancy caused by the voluntary retirement or voluntary separation shall not be filled up, the requirements (iii) and (iv) of rule 2BA have not been fulfilled. 21. The employers who are the authors of the schemes, the better persons to explain as to how they conceived the schemes, informed the Department in the following manner: "ICICI 1. Under section 10(10C) of the Act, exemption from tax is available on amounts received under scheme of voluntary retirement or scheme of voluntary separation framed in accordance with the guidelines prescribed in rule 2BA of the Rules. As explained earlier, since the ERO 2003 Scheme of the bank does not satisfy all the requirements specified in rule 2BA of the Rules, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g some alternative optional facilities and work opportunities to the Bank staff. (d) Clause (iv) of rule 2BA provides that the vacancy caused by voluntary retirement is not to be filled up. Bank has not bound itself not to fill up the vacancies arising out of ORES. It is open to the Bank to make need based recruitment against such vacancies, if and when considered appropriate by the Bank. (e) Under the Bank's scheme, the employee was eligible for ex-gratia amount equal to pay plus dearness allowance for the number of years of actual completed year of service or part thereof in excess of six months or pay plus dearness allowance for remaining months of service reckoned up to the date on which the employee would retire on superannuation, whichever is less." 22. Accordingly, in view of the differences between the Bank OERS and the guidelines laid down in rule 2BA of the Income-tax Rules, the ex-gratia paid under the Bank's scheme does not qualify for exemption under section 10(10C) of the Income-tax Act. As such, the Bank has not allowed the exemption under section 10(10C) of the Income-tax Act, 1961, to the employees who had opted for OERS. 23. In order to entitle the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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