ALBERT GNANA SELVAM DANIEL,CHENNAI V. INCOME TAX OFFICER NON CORP WARD 1(2), CHENNAI

ITA 2393/CHNY/2025

AI Insights

The case involves Albert Gnana Selvam Daniel, who was employed with Pfizer Health Care India Private Limited and received severance pay and other incentives due to the closure of a factory. The Income Tax Department assessed these payments, leading to disputes over their taxability. Initially, the Assessing Officer (AO) taxed the severance pay and denied exemptions claimed under section 10(10B) of the Income-tax Act, 1961. The Commissioner of Income Tax (Appeals) upheld some of these decisions but deleted the addition of the ex-gratia payment. The Tribunal's decision focused on whether an additional Rs.12,00,000 received as incentives was taxable, remitting this issue back to the AO for further verification.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 833609 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2019-2020
• Appeal Filed On: 28-08-2025
• Other Referred Cases: Shri Parvez Mukthar Khan v. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURUPRASAD; C.I.T
• Assessee Lawyers: Y. SRIDHAR; F

Judgement Text

" आयकर अपीलीय अिधकरण, ‘ए’ \u0001यायपीठ, चे ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ी मनु कुमार िग\u000eर, \u0001याियक सद\u0013य एवं ी एस. आर. रघुनाथा, लेखा सद\u0013य के सम\u0018 BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:2393/Chny/2025 नधा\u0010रण वष\u0010 / Assessment Year: 2019-20 Albert Gnana Selvam Daniel, No.4, Hospital Road, T.Nagar, Chennai – 600 017. vs. ITO, Non -Corporate Ward -1(2), Chennai. [PAN:AJCPD-5712-D] (अपीलाथ\u0015/Appellant) (\u0016\u0017यथ\u0015/Respondent) अपीलाथ\u0015 क\u0019 ओर से/Appellant by : Shri. Y. Sridhar, F.C.A. \u0016\u0017यथ\u0015 क\u0019 ओर से/Respondent by : Shri. Guru Prasad, Addl. C.I.T. सुनवाई क\u0019 तार ख/Date of Hearing : 12.01.2026 घोषणा क\u0019 तार ख/Date of Pronouncement : 04.02.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM: The present appeal of the assessee is directed against the order dated 31.03.2025 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld.CIT(A)”], arising out of the assessment order dated 23.09.2021 passed u/s.143(3) of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] by the National Faceless Assessment Centre [hereinafter referred to as “the AO”], pertaining to Assessment Year 2019-20. 2. At the outset, we note that the present appeal has been filed by the assessee with a delay of 89 days. Having considered the reasons furnished by the assessee for Printed from counselvise.com :-2-: ITA. No:2393/Chny/2025 the said delay, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed period. Accordingly, the delay of 89 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits. 3. The brief facts, as emanating from the records, are that the assessee was employed with Pfizer Health Care India Private Limited. During the impugned assessment year, the assessee received severance pay / ex gratia payment from the said employer on account of closure of its factory situated at Irungattukottai (IKKT), Tamil Nadu, under a scheme framed by the company titled “Pfizer Health Care India Pvt. Ltd. – Financial Scheme for Employees at IKKT, 2019”. 4. The assessee filed his return of income for the assessment year under consideration, wherein he claimed exemption of Rs.5,00,000/- treating the same as retrenchment compensation u/s.10(10B) of the Act and further claimed that the ex- gratia payment amounting to Rs.37,08,477/- was not exigible to tax. The assessment was completed by the AO u/s.143(3) of the Act vide order dated 23.09.2021, wherein the AO denied the exemption of Rs.5,00,000/- claimed by the assessee u/s.10(10B) of the Act. The AO further held that the ex-gratia payment of Rs.37,08,477/- was taxable as “profits in lieu of salary” u/s.17(3) of the Act or, in the alternative, taxable u/s.56(2)(xi) of the Act. 5. Aggrieved by the additions made by the AO, the assessee carried the matter in appeal before the Ld.CIT(A). The Ld.CIT(A), vide the impugned appellate order, deleted the addition of Rs.37,08,477/- made by the AO towards ex-gratia payment. However, the assessee’s claim of exemption of Rs.5,00,000/- u/s.10(10B) of the Act was dismissed by the Ld.CIT(A) as not pressed. 6. Aggrieved by the order passed by the Ld.CIT(A), the assessee is in further appeal before the Tribunal. 7. The Ld.AR for the assessee submitted that, apart from the ex-gratia amount of Rs.37,08,477/-, the assessee had also received an additional sum of Rs.12,00,000/- towards early bird incentive and group participation incentives from his employer as Printed from counselvise.com :-3-: ITA. No:2393/Chny/2025 part of the overall settlement under the financial scheme framed by the employer. The Ld.AR, placing reliance on various judicial precedents, contended that the said amount of Rs.12,00,000/- is also not exigible to tax in the hands of the assessee. Accordingly, it was prayed that suitable directions be issued to the Assessing Officer to delete the same. 8. Per contra, the Ld.DR appearing for the Revenue strongly opposed the submissions advanced on behalf of the assessee. The Ld.DR relied upon the orders of the lower authorities and prayed that the appeal filed by the assessee be dismissed. 9. We have heard the rival submissions and carefully perused the material placed on record. It is an admitted position that the assessee was employed with Pfizer Health Care India Private Limited and, upon closure of the factory, received ex- gratia/compensation payments from the said employer. 10. At the outset, we note that before this Tribunal, the assessee has raised an additional claim for the first time, contending that a sum of Rs.12,00,000/- was received towards “early bird incentive” and “group participation incentive”, which, according to the assessee, formed an integral part of the overall settlement arrived at pursuant to the financial scheme formulated by the employer. The assessee’s contention is that the aforesaid amount partakes the character of the compensation package and, therefore, deserves the same tax treatment as other ex-gratia receipts and is consequently not chargeable to tax. 11. We find that the Co-ordinate Pune Bench of the Tribunal, in the case of Shri Parvez Mukthar Khan v. ITO in ITA No.1111/PUN/2024, has considered an identical issue arising from compensation received from Pfizer upon factory closure, including early bird incentive and group participation incentive. The Co-ordinate Bench, after considering the nature of such receipts under the scheme, held that the entire compensation, including the aforesaid incentive components, was not taxable in the hands of the employee. Printed from counselvise.com :-4-: ITA. No:2393/Chny/2025 12. Respectfully following the decision of the Co-ordinate Bench (supra), and in the interest of justice, we deem it appropriate to remit this limited issue to the file of the Jurisdictional Assessing Officer/JAO. The JAO is directed to verify and ascertain the true nature and character of the amount of Rs.12,00,000/-, claimed by the assessee for the first time before this Tribunal, with reference to the financial scheme/settlement policy framed by the employer and the relevant supporting documentary evidence. 13. In case, upon such verification, it is found that the said sum of Rs.12,00,000/- was indeed received by the assessee, and the said receipt represents early bird incentive and/or group participation incentive forming part of the overall settlement/compensation package under the employer’s scheme, then the JAO shall grant the corresponding relief by treating the said receipt as not taxable/exempt, in line with the ratio laid down in Shri Parvez Mukthar Khan v. ITO (supra), and accordingly delete the said amount from the total income of the assessee. Accordingly, the grounds raised by the assessee are allowed for statistical purposes. 14. In the result, the appeal of the assessee stands allowed for statistical purposes. Order pronounced in the open court on 04th February, 2026 at Chennai. Sd/- Sd/- (मनु क ुमार $ग&र) (MANU KUMAR GIRI) 'या यक सद)य/Judicial Member (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखासद)य/Accountant Member चे'नई/Chennai, +दनांक/Dated, the 04th February, 2026 SP आदेश क\u0019 \u0016 त-ल.प अ/े.षत/Copy to: 1. अपीलाथ\u0015/Appellant 2. \u0016\u0017यथ\u0015/Respondent 3.आयकर आयु0त/CIT– Chennai/Coimbatore/Madurai/Salem 4. .वभागीय \u0016 त न$ध/DR 5. गाड\u0010 फाईल/GF Printed from counselvise.com "