Manharbhai Ramjibhai Zinzuwadia, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-4(4), RAJKOT-GUJARAT

ITA 1191/RJT/2010

• Counselvise Citation: 119124914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 27-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Depreciation; Additional evidence
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI D.K. TYAGI (JM) AND SHRI A.L. GEHLOT (A M) I.T.A. NO.1191/RJT/2010 (ASSESSMENT YEAR 2007-08) MANHARBHAI RAMJIBHAI ZINZUWADIA VS THE ITO, WD.4(4) STREET NO.7 RAJKOT CHANDRA PARK RAIYA ROAD, RAJKOT PAN : AABPZ7274J (APPELLANT) (RESPONDENT) DATE OF HEARING : 30-09-2011 DATE OF PRONOUNCEMENT : 21-11-2011 APPELLANT BY : NONE RESPONDENT BY: SHRI MK SINGH O R D E R PER BENCH THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A)-III, RAJKOT DATED 02-08-2010 PERTAINING TO ASSESSMENT YE AR 2007-08. 2. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE AT TH E TIME OF HEARING. AFTER HEARING THE LD.DR WE PROCEED TO DECIDE THE APPEAL O N MERIT. 3. THE ASSESSEE HAS RAISED AS MANY AS FIVE GROUNDS. BUT THE EFFECTIVE GROUND IS IN RESPECT OF CHALLENGING THE DISALLOWANC E OF CLAIM OF RS.5 LAKHS OUT OF EX GRATIA RECEIVED ON ACCOUNT OF VOLUNTARY RETIREME NT FROM STATE BANK OF INDIA. THE ASSESSING OFFICER HELD THAT THE SCHEME DOES NOT COMPLY WITH RULE 10(10C) OF THE ACT AND THEREFORE, EX GRATIA AMOUNT OF RS.7,18, 964 IS NOT COVERED UNDER THAT ITA NO.1156/RJT/2010 2 SECTION. THE CLAIM OF THE ASSESSEE WAS THAT RS.7,1 8,964 WAS RECEIVED AS AN EX GRATIA PAYMENT ON THE EVE OF HIS VOLUNTARY RETIREME NT FROM STATE BANK OF INDIA AS PER THE SCHEME. THE CIT(A) HELD THAT NO EXEMPTION IS AVAILABLE U/S 10(10(C) R.W.R. 2BA TO EXIT OPTION SCHEME OF THE SBI. THERE FORE, THE ASSESSEE IS NOT ENTITLED TO EXEMPTION AS PROVIDED IN SECTION 10(10C ) R.W.R. 2BA OF THE ACT. 4. AFTER HEARING THE LD.DR WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS KOODATHIL KALLYATA N AMBUJAKSHAN(BOMB)ITA NO. 53 OF 2008 JULY 4, 2008 WHEREIN IT HAS BEEN HEL D AS FOLLOWS: 10. 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 SEC TOR UNDERTAKINGS TO PLAY THEIR ROLE IN NATIONAL ECONOMY BY IMPROVEMENT IN THEIR FUNCTIONING IN ALL POSSIBLE WAYS. THE PROV ISION AS EXPLAINED BY THE APEX COURT IS AN INCENTIVE FOR UNWANTED PERS ONNEL TO SEEK VOLUNTARY RETIREMENT. THE APPLICANT IS AN EMPLOYEE OF AN AUTHORITY ESTABLISHED UNDER THE CENTRAL ACT. THE SCHEME FOR V OLUNTARY WAS FRAMED BY R.B.I. CONSIDERING THE PROVISIONS OF THE ACT ITSELF SUCH A BENEFIT IS AVAILABLE TO THE EXTENT OF RS.5.00 LAKHS . . THE SECTION, THEREFORE, SPEAKS OF A SCHEME FOR VOL UNTARY RETIREMENT OR TERMINATION OF SERVICE. THE SECTION D OES NOT PROVIDE FOR ANY PREDICATES. NORMALLY, THEREFORE, THE SCHEME OUGHT TO READ AS A SCHEME FRAMED BY THE COMPANY OR AUTHORITY SET OUT UNDER SECTION 10(10C) OF THE ACT. RULES, HOWEVER, HAVE BE EN MADE WHICH ARE KNOWN AS GUIDELINES FOR THE.(-17-) PURPOS E OF SECTION 10(10C). THE GUIDELINES ARE NOT UNDER CHALLENGE BEF ORE US. WE, THEREFORE, PROCEED ON THE BASIS THAT THESE GUIDELIN ES ALSO WILL HAVE TO BE FULFILLED. THE RULE, HOWEVER, WILL HAVE TO BE READ BEARING IN MIND THE OBJECT OF SECTION 10(10C) ITSELF. UNDER TH E RULES A SCHEME FRAMED MUST BE IN ACCORDANCE WITH THE REQUIR EMENTS AS SET OUT THEREIN. THE SCHEME, THEREFORE, MUST EITHER EXPRESSLY OR IMPLIEDLY COMPLY WITH THE REQUIREMENTS. MERELY BECA USE THE ITA NO.1156/RJT/2010 3 SCHEME MAY NOT EXPRESSLY SET OUT THAT THE POSTS WIL L NOT BE FILLED IN CANNOT RESULT IN THE SCHEME NOT BEING A SCHEME FALL ING UNDER SECTION 10(10C) READ WITH RULE 2BA OF THE RULES, BE ARING IN MIND THE PROCEDURAL NATURE OF THE RULES. IT WILL HAVE TO BE READ IN HARMONIOUS CONSTRUCTION WITH THE SUBSTANTIVE PROVIS IONS OF THE ACT SO AS NOT TO RENDER IT ULTRA VIRES THE PROVISIONS O F THE SUBSTANTIVE PROVISIONS OF THE ACT. . APPLYING THE TESTS WE FIND FIRSTLY THAT IT SATISF IES THE FIRST TEST NAMELY 10 YEARS OF SERVICE AND 40 YEARS OF AGE. IN THE INSTANT CASE IT IS 25 YEARS OF SERVICE AND 50 YEARS OF AGE. SECO NDLY IT APPLIES TO ALL EMPLOYEES. THIS MEETS THE SECOND REQUIREMENT. T HE THIRD REQUIREMENT IS THAT THE SCHEME HAS BEEN DRAWN TO RE SULT IN OVER ALL REDUCTION IN THE EXISTING STRENGTH OF THE EMPLOYEES . THIS HAS NOT BEEN EXPRESSLY STATED IN THE SCHEME. HOWEVER, WE HA VE NOTED THE OBJECT BEHIND THE SECTION.(-18-) 10(10C) AND THE NO TE PUT UP BEFORE THE GOVERNOR AT THE TIME WHEN THE SCHEME WAS FRAMED . THE MATERIAL ON RECORD WOULD INDICATE THAT THE EMPLOYEE S HAD BEEN RENDERED SURPLUS ON ACCOUNT OF VARIOUS STEPS TAKEN BY THE EMPLOYER. THE SCHEME, THEREFORE, WAS MEANT FOR AN O VER ALL REDUCTION IN THE EXISTING STRENGTH OF THE EMPLOYEES . THE THIRD REQUIREMENT IS ALSO, THEREFORE, SATISFIED. THE FOUR TH REQUIREMENT WAS THE VACANCY CAUSED BY THE VOLUNTARY RETIREMENT OR VOLUNTARY SEPARATION IS NOT TO BE FILLED UP. WE MAY FIRSTLY N OTE THAT A FINDING OF FACT HAS BEEN RECORDED BY THE TRIBUNAL ON THAT COUN T WHICH IS NOT CHALLENGED BEFORE US IN TERMS OF THE QUESTIONS OF L AW AS FRAMED BY THE REVENUE. SECONDLY THERE WAS MATERIAL ON RECORD WHICH SHOWS THAT THE SCHEME BASICALLY WAS TO REDUCE THE EMPLOYE E STRENGTH AS POSTS HAD BECOME SURPLUS ON ACCOUNT OF REORGANISATI ON. ONE CANNOT FILL IN THE POSTS WHICH HAVE BECOME SURPLUS AS THE POSTS HAVE BECOME REDUNDANT. ALSO ADDITIONAL EVIDENCE TAK EN ON RECORD UNDER SECTION 260A(7) WOULD SHOW THAT NONE OF THESE POSTS FROM THE DAY THE SCHEME CAME INTO FORCE TILL 2008 HAVE B EEN FILLED IN. IN OTHER WORDS THE FOURTH REQUIREMENT HAS ALSO BEEN SA TISFIED. 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 STA TUTORY BODY CREATED UNDER AN ACT THERE IS NO OTHER COMPANY OR.( -19-) CONCERN BELONGING TO THE SAME MANAGEMENT. THE FIFTH REQUIRE MENT HAS ALSO BEEN SATISFIED. THE SIXTH REQUIREMENT HAS ALSO BEEN SATISFIED AS IN THE INSTANT CASE WHAT IS OFFERED IS TWO MONTHS SALA RY FOR EACH COMPLETED YEAR OF SERVICE. THUS THE SCHEME EXPRESSL Y OR IMPLIEDLY SATISFIED ALL THE REQUIREMENTS OF THE SECTION AS WE LL AS THE GUIDELINES FRAMED FOR THE PURPOSE OF SECTION 10(10C ) NAMELY RULE 2BA. ITA NO.1156/RJT/2010 4 11. THE ONLY OTHER QUESTION WHICH IS LEFT FOR OUR C ONSIDERATION IS WHETHER THE CIRCULAR ISSUED BY CBDT WAS BINDING ON THE AUTHORITIES DISCHARGING QUASI JUDICIAL FUNCTIONS OR FOR THAT MA TTER THE ASSESSEE OR IS THIS COURT PRELUDED FROM ANSWERING THE ISSUE CONTRARY TO THE C.B.D.T. CIRCULAR. . THE C.B.D.T. CIRCULAR TOOK NOTE OF THE LETTER WRI TTEN BY THE R.B.I. IN OUR OPINION THAT LETTER BY ITSELF WOULD N OT BE OF MUCH CONSEQUENCES AS THE O.E.R.S. ITSELF NOTES THAT INCO ME TAX IF ANY WOULD BE PAYABLE BY THE EMPLOYEE. EVEN IN THE NOTE PUT UP BY THE DEPARTMENT FOR INTRODUCTION OF THE SCHEME FOR CONSI DERATION OF THE GOVERNOR IT WAS MADE CLEAR THAT IF ANY INCOME TAX I S PAYABLE THAT WILL BE PAID BY THE EMPLOYEE AND IT WAS FURTHER MAD E CLEAR THAT THE PAYMENT IS SUBJECT TO PROVISIONS OF SECTION 10(10C) OF THE INCOME TAX ACT. THE LETTER, THEREFORE, BY R.B.I. BY ITSELF WOULD NOT BE.(-20-) DETERMINATIVE AS TO WHETHER THE INCOME IS LIABLE TO TAX. ONE HAS TO SEE THE SCHEME FRAMED IN TERMS OF SECTION 10(10C) A ND WHETHER IT SATISFIES THE GUIDELINES IN TERMS OF RULE 2BA OF TH E RULES. IN COMMISSIONER OF INCOME-TAX VS. HERO CYCLES PVT. COM MISSIONER OF INCOME-TAX VS. HERO CYCLES PVT. COMMISSIONER OF INC OME-TAX VS. HERO CYCLES PVT. LTD. AND ORS., 228 ITR 463 LTD. AN D ORS., 228 ITR 463 LTD. AND ORS., 228 ITR 463 THE SUPREME COURT HA S OBSERVED AS UNDER:- 'MOREOVER, IT IS WELL-SETTLED THAT CIRCULARS CAN BI ND THE INCOME-TAX OFFICER BUT WILL NOT BIND THE APPELLATE AUTHORITY O R THE TRIBUNAL OR THE COURT OR EVEN THE ASSESSEE.' THIS VIEW HAS BEEN REITERATED BY THE APEX COURT IN UCO BANK VS. COMMISSIONER OF INCOME-TAX, 237 ITR UCO BANK VS. COMMISSIONER OF INCOME-TAX, 237 ITR UCO BANK VS. COMMISSIONER OF INCOME-TAX, 237 ITR 889 889 889 AS ALSO IN COMMISSIONER OF SALES TAX VS. INDRA COMMISSIONER OF SALES TAX VS. INDRA COMMISSIONER OF SALES TAX VS. INDRA INDUS TRIES, 248 ITR 338 INDUSTRIES, 248 ITR 338 INDUSTRIES, 248 ITR 338 . THE COURT, THEREFORE, IS NOT PRECLUDED TO CONSIDER THE ISSUE I RRESPECTIVE OF THE C.B.D.T. CIRCULAR. ON EXAMINATION OF THE ISSUE IT W OULD BE CLEAR THAT THE GUIDELINES HAVE TO BE READ IN CONFORMITY WITH T HE STATUTORY PROVISIONS. ON THE FACTS IN THE INSTANT CASE, THE T RIBUNAL HAS RECORDED A FINDING THAT THE PREDICATES OF THE RULE HAVE BEEN SATISFIED. THE SUPREME COURT IN COMMISSIONER OF INC OME TAX VS. GWALIOR RAYON SILK COMMISSIONER OF INCOME TAX VS. G WALIOR RAYON SILK COMMISSIONER OF INCOME TAX VS. GWALIOR R AYON SILK MILL MANUFACTURING CO. LTD. 196 ITR 149 MILL MANUFA CTURING CO. LTD. 196 ITR 149 MILL MANUFACTURING CO. LTD. 196 ITR 149 HAS OBSERVED AS FOLLOWS:- ITA NO.1156/RJT/2010 5 'LOGIC ALONE WILL NOT BE DETERMINATIVE OF A.(-21-) CONTROVERSY ARISING FROM A TAXING STATUTE. EQUALLY, COMMON SENSE IS A S TRANGER AND AN INCOMPATIBLE PARTNER TO THE INCOME-TAX ACT. IT DOES NOT CONCERN ITSELF WITH THE PRINCIPLES OF MORALITY OR ETHICS. I T IS CONCERNED WITH THE VERY LIMITED QUESTION AS TO WHETHER THE AMOUNT BROUGHT TO TAX CONSTITUTES THE INCOME OF THE ASSESSEE. IT IS EQUAL LY SETTLED LAW THAT IF THE LANGUAGE IS PLAIN AND UNAMBIGUOUS, ONE CAN O NLY LOOK FAIRLY AT THE LANGUAGE USED AND INTERPRET IT TO GIVE EFFEC T TO THE LEGISLATIVE INTENTION. NEVERTHELESS, TAX LAWS HAVE TO BE INTERP RETED 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 OBJEC T BEING THAT, IN COMPUTATION OF THE NET INCOME, THE STATUTE PROVIDES DEDUCTIONS, EXEMPTIONS OR DEPRECIATION ON THE VALUE OF THE CAPI TAL ASSETS FROM THE TAXABLE INCOME......' APPLYING THESE PRINCIPLES WE ARE CLEARLY OF THE OPI NION ON A PROPER CONSTRUCTION OF THE RULES THAT THE SCHEME ITSELF MA Y NOT EXPRESSLY STATE ALL THE TERMS AS IT IS POSSIBLE FOR THE COURT TO READ THE.(-22-) IMPLIED TERMS OF THE SCHEME. IN THE INSTANT CASE WE HAVE SO READ. THE QUESTION NOS. 1 AND 2, THEREFORE, AS FRAMED WIL L HAVE TO BE ANSWERED AGAINST THE APPELLANT. 12. THAT BRING US TO THE QUESTIONS 3 AND 4. AS RIGH TLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THE QUESTION H AS BEEN ANSWERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF A CO- ORDINATE BENCH OF THIS COURT IN THE CASE OF COMMISS IONER OF INCOME COMMISSIONER OF INCOME COMMISSIONER OF INCOME TAX V S. NAGESH VS. NAGESH DEVIDAS KULKARNI, 291 TAX VS. NAGESH VS. NAGESH DEVIDAS KULKARNI, 291 TAX VS. NAGESH VS. NAGESH DEV IDAS KULKARNI, 291 ITR 407. ITR 407. ITR 407. THIS JUDGM ENT WAS CONSIDERED BY THE CENTRAL BOARD OF DIRECT TAXES. TH E CENTRAL BOARD FOR DIRECT TAXES BY THEIR COMMUNICATION DATED 16TH JANUARY, 2008 HAVE INFORMED THE CHIEF COMMISSIONER OF INCOME TAX, MUMBAI, THAT THEY HAVE ACCEPTED THE SAID JUDGMENT. IN OTHER WORDS THE JUDGMENT OF THIS COURT WOULD NOT BE APPEALED AG AISNT. IN OTHER WORDS FOR THE AMOUNT IN EXCESS OF RS.5.00 LAKHS REC EIVED UNDER THE O.E.R.S. THE ASSESSEE WOULD BE ENTITLED TO THE BENE FITS UNDER SECTION 89 IN ADDITION TO THE BENEFITS AVAILABLE UN DER SECTION 10(10C) OF THE INCOME TAX ACT. (EMPHASIS OURS) WE, RESPECTFULLY FOLLOW THE ABOVE JUDGMENT OF THE B OMBAY HIGH COURT. THE ASSESSING OFFICER IS DIRECTED TO APPLY THE ABOVE JU DGMENT OF THE BOMBAY HIGH ITA NO.1156/RJT/2010 6 COURT TO THE CASE OF THE ASSESSEE AND ALLOW NECESSA RY RELIEF TO THE ASSESSEE. IF NEED BE, THE ASSESSEE MAY ALSO BE HEARD. ORDER PRONOUNCED IN THE OPEN COURT ON 10-2011. SD/- SD/- (D.K. TYAGI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : OCTOBER, 2011 PK/- ORDER PRONOUNCED ON 21-11-2011 SD/- SD/- JM AM COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-III, RAJKOT 4. THE CIT-II, RAJKOT 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER SR PS, ITAT, RAJKOT