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TMI Blog2024 (9) TMI 1717X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the amount received from Pfizer company are in the nature of ex-gratia payments voluntarily and hence did not fall under the definition of profits received in lieu of salary and therefore asked the Assessing Officer to permit him to withdraw the claim of deduction u/s 89 and treat the amount received from Pfizer as capital receipt and complete the assessment. 3. However, the Assessing Officer did not accept the above contention of the assessee and treated the amount of Rs. 69,24,655/- as profit in lieu of salary by observing as under: "4 After considering the submissions made by the assessee and the provisions of Income Tax Act, it is clear that any additional compensation/severance received by an employee from employer taxed as "Profit in lieu of salary" under Section 17(3) of Income Tax Act. Therefore, any compensation due to or received by a person from his employer in connection with termination of his employment is taxable as salary in the hands of the employee at the applicable slab rates. The tax treatment is the same if assessee receives ex gratia payment on account of shutting down of company. Hence, the amount received by the assesses to the tune of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 as stated in para 6 above." 4. In appeal, the CIT (A) / NFAC upheld the action of the Assessing Officer. 5. Aggrieved with such order of CIT (A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: "1. The Learned CIT (A) has erred on Facts & Law & has not adjudicated the most important de crucial Ground of Appeal of the said amounts being claimed as Capital Receipts, in an appropriate & judicious manner. The Learned CIT (A) has erred & has failed in taking up the said Ground legally & has not considered & has not commented on any Submissions, Explanations & Legal Judgements. The Learned CIT (A) has failed to adhere to the main Ground hence the Appeal should be restored back to the Hon'ble CIT (A) for adjudication of the Ground of Capital Receipts. 2. The Learned CIT (A) has erred in confirming the AO's ascertaining incorrect perspective of Form 10E, Form 16 & has thus erred in not granting relief u/s 89. 3. The Learned CIT (A) has erred in confirming the AO's failure to make any enquiries related to non-reliability of Form 10E, employer not reporting relief u/s 89 in Form 16 & the same being taxable u/s 17(3)(i) & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NFAC and the paper book filed by both the sides. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case rejected the claim of relief u/s 89 of the Act of Rs. 18,74,899/- on income of Rs. 57,12,674/- treating the same as income u/s 17(3) of the Act. We find the CIT (A) / NFAC upheld the action of the Assessing Officer, reasons of which are already reproduced in the preceding paragraphs. The CIT (A) / NFAC also rejected the alternate claim of the assessee that such amount being a capital receipt cannot be brought to tax. It is the submission of the Ld. Counsel for the assessee that in case of various other employees who have received similar compensation, the same has been accepted as capital receipt by the respective AOs in re-assessment proceedings and no addition has been made. Further, various Co-ordinate Benches of the Tribunal in similarly placed employees have also treated such compensation received on termination of service as capital in nature and not falling u/s 17(3) of the Act. 24. We find the Assessing Officer in the case of Sharad D. Magar, who also resigned voluntarily from service of Pfizer Healthc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, find merit in the arguments of the Ld. Counsel for the assessee that when the concerned AOs after reopening of the assessment have treated such compensation as capital in nature and the Revenue has not challenged the same and which has attained finality since no 263 proceedings have been initiated, therefore, the assessee's case being identical to the facts of the other employees of Pfizer Healthcare India Pvt. Ltd., the CIT (A) / NFAC is not justified in sustaining the addition made by the Assessing Officer. 26. We further find the Hon'ble Calcutta High Court in the case of CIT vs. Ajit Kumar Bose (supra) has observed as under: "4. The amount in question was received by the assessee from his employer. It was received by him in connection with the termination of his service. But the question still remains whether it was compensation. Since it was received by the assessee in connection with the termination of his employment, the term "compensation" would be referable to that event. In other words, it is to be seen whether the amount was paid as compensation for the termination or in lieu of the termination of the employment. 5. The letter issued by the employer dated J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous other decisions relied on by the Ld. Counsel for the assessee placed in the paper book support his case to the proposition that the payment of ex-gratia compensation received by the assessee was voluntary in nature without there being any obligation on the part of the employer to pay further amounts to the assessee in terms of any service rule and therefore, would not amount to compensation in terms of section 17(3) of the Act. We, therefore, set aside the order of the CIT (A) / NFAC and direct the Assessing Officer to delete the addition. The grounds raised by the assessee are accordingly allowed." 7. Since the facts of the instant case are identical to the facts of the case already decided by the Tribunal in the case of Ashok Raghunathrao Kulkarni vs. ITO (supra) (to which both of us are parties), therefore, respectfully following the same, we hold that the amount of Rs. 69,24,655/- received as ex-gratia is not taxable being capital in nature. Accordingly, the same is directed to be deleted. The grounds raised by the assessee are accordingly allowed. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 17th September, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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