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TMI Blog2024 (10) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... uced w.e.f. 1st April 2019, deals with compensation received or receivable in connection with the termination or modification of terms of employment contracts. However, this amendment applies to assessment years starting from AY 2019-20 onwards. Since the current assessment year is AY 2018-19, the amendment has no bearing on the current case. We are of the considered opinion that the severance compensation received by the assessee is a capital receipt, not chargeable to tax u/s 17(3). The order of the CIT(A) is set aside, and the addition made by the AO is deleted. Given that the addition u/s 17(3) of the Act is being set aside, the consequential levy of interest under Sections 234A/B/C/D of the Act and the initiation of penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order dated 19/01/2021, treated this amount as profits in lieu of salary under Section 17(3) of the Act, and added it to the total income of the assessee, leading to an assessed income of Rs. 22,80,695/-. The CIT(A), in confirming the addition made by the AO, relied on the provisions of Section 17(3) of the Act, which defines profits in lieu of salary. The CIT(A) observed that since the compensation received by the assessee was related to the termination of employment, it should be treated as profits in lieu of salary under Section 17(3)(i) of the Act. The CIT(A) rejected the assessee s contention that the amount was a capital receipt, not chargeable to tax. Furthermore, the CIT(A) disregarded the assessee s reliance on various judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this appeal before us. The assessee filed an affidavit along with the application for condonation of delay, stating that the delay occurred due to a clerical oversight. The papers were handed over to the clerk of the Chartered Accountant on 15/05/2024, the due date for filing the appeal. However, at the time of filing, it was noticed that one of the copies of the appeal memo was not signed. Consequently, the signature was obtained the next day, causing a delay of one day. 4. The learned Departmental Representative (DR) did not object to the condonation of the delay. In light of the reasons stated in the affidavit and the absence of any objection from the DR, we are satisfied that the delay is neither intentional nor willful. Therefore, we c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kulkarni vs. ITO [2024] 165 taxmann.com 680 (Pun-Tribunal). 6. The DR supported the orders of the lower authorities and contended that the severance compensation was rightly treated as profits in lieu of salary under Section 17(3) of the Act, as the amount was paid due to the termination of employment. 7. We note that the assessee was employed as the Zonal Business Head with You First Money Express Private Limited , which was subsequently acquired by Ebix Money Express Private Limited . Following the acquisition, the assessee s employment was terminated effective from 26th October 2017, on account of redundancy. As per the letter placed before us, the assessee received a severance compensation of Rs. 18,00,000/-, which included pay for noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r amounts upon termination, the compensation should be deemed a capital receipt and thus not taxable under Section 17(3). 7.3. The Act distinguishes between receipts that are taxable as salary income and those that are considered capital receipts, which are generally not taxable unless explicitly brought within the tax net by specific provisions of the Act. Under Section 17(3), profits in lieu of salary is a key provision that seeks to tax certain payments received by an employee in connection with the termination of employment. On the other hand, capital receipts, especially in the context of employment, typically relate to compensation for the loss of a source of income and are generally not taxable, unless specified. 7.4. This distinctio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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