Appeal details
Counselvise Citation
13524114 RSA 2014
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-08-2014
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Assessment Year
2008-2009
Appeal Filed On
21-04-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO.135/PNJ/2014 (ASSESSMENT YEAR - 2008 - 09) THE INCOME TAX OFFICER, WARD - 2(1), BELGAUM. (APPELLANT) VS. SMT. SUVARNA BASAVARAJ KOTI, PLOT NO. 81,KRUTI,SMRH COLONY, R.C. NAGAR, BELGAUM. PAN:AETPK7157H (RESPONDENT) APPELLANT BY : SHRI NISHANT K. LD. DR. RESPONDENT BY : SHRI U.G. AMMANGI, CA. DATE OF HEARING : 14/07 /2014 DATE OF PRONOUNCEMENT: 08 /08 /2014 O R D E R PER: D.T. GARASIA THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AG AINST THE ORDER OF CIT(A) - BELGAUM, DATED 11.02.2014 FOR THE ASSESSMENT YEAR 2008 - 09 . 2. THE FOLLOWING GROUNDS ARE RAISED IN THIS APPEAL AS UNDER: - (1) THE ORDER PASSED BY THE CIT(A) IS AGAINST THE ORDER/INSTRUCTION OF THE BOARD IN F. NO.200/34/2009 - IT.I DATED 6.10.2009 AND AS SUCH, COVERED BY THE EXCEPTIONS AT PARA - 8(B) OF INSTRUCTION NO.3/2011 DATED 09.02.2011 IN REGARD TO MONETARY LIMIT FOR FILING OF APPEAL AND THEREFORE, IT IS PRAYED THAT THE APPEAL ON THE ISSUE BE ADMITTED IN LAW. (2) THE CIT(A) ERRED IN IGNORING E - CIRCULAR ON EXIST OPTION SCHEME ISSUED BY THE STATE BANK OF INDIA, CORPORATE CENTRE, MUMBAI WHEREIN, AS PER PARA - 10, IT IS CLEARLY MENTIONED THAT NO EXEMPTION OF EX - GRATIA FROM INCOME TAX UNDER SECTION 10(10C) OF THE I.T. ACT, 1961, IS INTENDED IN THAT SCHEME. (3)THE CIT(A) ERRED IN PRESUMING THAT REQUIREM ENTS OF RULE 2BA OF I.T.RULES, 1962 HAVE BEEN MET IGNORING THE E - CIRCULAR OF THE SBI, AS WELL AS THE BOARDS INSTRUCTION 2 . ITA NO.135/PNJ/2014 (A.Y.2008 - 09) ITO VS. SMT. SUVARNA BASAVARAJ KOTI NO.200/34/2009 - IT.I DATED 6.10.2009 WHEREIN, IT IS CLEARLY MENTIONED THAT THE SCHEME FRAMED BY THE STATE BANK OF PATIALA AND STATE BANK OF INDIA DOES NOT LAY OUT ELIGIBILITY FOR DEDUCTION UNDER SECTION 10(10C). 2.1. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED RETURN OF INCOME FOR A.Y.2008 - 09 ON 06.03.2009 DECLARING A TOTAL INCOME OF RS. 4,43,040/ - . THE ASSESSEE WAS EMPLOY ED WITH STATE BANK OF INDIA, AND H AS TAKEN VOLUNTARY RETIREMENT UNDER EXIST OPTION AFTER SERVING 26 YEAR S. THE ASSESSEE CLAIMED OF RS. 5,00,000/ - AS EXEMPT U/S. 10(10C) OF THE INCOME TAX ACT. THE ASSESSING OFFICER DENIED THIS EXEMPTION ON THE GROUND THAT THIS EXIT OPTION SCHEME OF STATE BANK OF INDIA AND STATE BANK OF PATIALA ARE NOT IN ACCORDANCE WITH THE RULE 2BA, THEREFORE, IT WAS DISALLOWED. 2.3. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 5. I HAVE CONSID ERED THE FACTS OF THE CASE CAREFULLY AND THE APPELLANTS SUBMISSIONS. THE EX - GRATIA AMOUNT RECEIVED ON VOLUNT ARY RETIREMENT IS EXEMPT U/S. 10(10 C) OF THE ACT TO THE EXTENT OF RS.5,00,000/ - . THE SCHEME OF THE SECTION, THEREFORE, BECOMES APPARENT CONSIDERING THE OBJECT TO WHICH THE AMENDMENT WAS INTRODUCED BY THE PARLIAMENT. THE OBJECT BEING TO MAKE THE PUBLIC SECTOR UNDERTAKING TO PLAN THEIR ROLE IN NATIONAL ECONOMY BY IMPROVEMENT IN THEIR FUNCTIONING IN ALL POSSIBLE WAYS. THE APPELLANT WAS AN EMPLOYEE OF AN AUTHORITY ESTABLISHED UNDER THE CENTRAL ACT. THE SCHEME FOR VOLUNTARY (EXIT OPTION SCHEME) WAS FRAMED BY STATE BANK OF INDIA CONSIDERING THE PROVISIONS OF THE ACT ITSELF. SUCH A BENEFIT IS AVAILABLE TO THE EXTENT OF RS,5 LAKHS. THE ISSUE OF ALLOWING EXEMP TION UNDER SECTION 10(1OC) OF THE ACT WAS EXAMINED BY THE HONBLE HIGH COURT OF BOMBAY, KOLKATTA AND JURISDICTIONAL HIGH COURT AND HELD THAT THE SAID EXEMPTION IS ALLOWABLE OUT OF THE COMPENSATION RECEIVED BY THE RETIRED EMPLOYEES, SOME OF THE DECISIONS AR E GIVEN BELOW - I) IN THE CASE OF CIT VS. NAGESH DEVIDAS KULKARNI AND OTHERS (2007) 291 ITR 407 (BOMBAY) IT IS HELD THAT SECTION 10(1OC) OF THE IT ACT, INTER ALIA, PROVIDES THAT ANY AMOUNT RECEIVED BY AN EMPLOYEE ON HIS VOLUNTARY RETIREMENT OR TERMINATION OF SERVICE FROM ANY EMPLOYER NAMED THEREIN, IN ACCORDANCE WITH ANY SCHEME OR SCHEMES OF VOLUNTARY RETIREMENT SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME TO THE EXTENT NOT EXCEEDING FIVE LAKHS OF RUPEES. SECTION 10(1OC) APPLIES TO THE AMOUNT RECEIV ED ON VOLUNTARY RETIREMENT UPTO RS.5,00,000 AND IT DOES NOT PLACE ANY EMBARGO ON THE AMOUNT RECEIVED ON VOLUNTARY RETIREMENT IN EXCESS OF RS.5,00,000. ON A PLAIN RE ADING OF THE SECOND PROVISO TO S .10(10 C) OF THE ACT, IT IS CLEAR THAT THE RESTRICTION 3 . ITA NO.135/PNJ/2014 (A.Y.2008 - 09) ITO VS. SMT. SUVARNA BASAVARAJ KOTI THEREI N IS ONLY WITH REFERENCE TO THE GRANT OF EXEMPTION UNDER SECTION 10(10 C) AND THE SAID PROVISO DOES NOT BAR RELIEF IF AVAILABLE UNDER S.89. 6. SECTION 89 OF THE ACT INTER ALIA PROVIDES THAT WHERE IN ANY FINANCIAL YEAR, THE ASSESSEE RECEIVED AN AMOUNT IN TH E NATURE OF SALARY OR RECEIVES PAYMENT WHICH IS A PROFI T IN LIEU OF SALARY, THEN THE AO , MAY ON AN APPLICATION GRANT SUCH RELIEFS AS MAY BE PRESCRIBED. RULES 21A, 21AA AND 21B OF THE IT RULES, 1962, PROVIDE FOR THE MECHANISM FOR GRANTING RELIEF UNDER S.89 OF THE ACT. THE EXPRESSION PROFIT IN L IEU OF SALARY IS DEFINED UNDER 5.17(3). EVEN IF THE ASSESSEE HAS OPTED FOR RETIREMENT VOLUNTARILY, THERE HAS TO BE TERMINATION BY THE EMPLOYER AND, THEREFORE, WHILE TERMINATING SERVICE ANY AMOUNT PAID ON ACCOUNT OF V OLUNTARY RETIREMENT WOULD BE PROFITS IN LIEU OF SALARY COVERED UNDER S.17(3) OF THE ACT. THE AMOUNT PAID ON TERMINATION OF SERVICE DUE TO VOLUNTARY RETIREMENT MAY BE AN EX GRATIA PAYMENT, BUT IT WOULD BE PROFITS IN LIEU O F SALARY AS CONTEMPLATED UNDER S.17(3) OF THE ACT. WHETHER THE TERMINATION OF EMPLOYMENT TOOK PLACE ON ACCOUNT OF THE VOLUNTARY DECISION OF THE EMPLOYEE OR NOT IS WHOLLY IRRELEVANT. THEREFORE, THE AMOUNT RECEIVED BY THE ASSESSEE BEING PROFITS IN LIEU OF SALARY AS CONTEMPLATED UNDER S. 17(3) OF THE ACT, THE ASSESSEE WOULD BE ENTITLED TO THE RELIEF UNDER SECTION 89 OF THE ACT. 7. THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER S. 10(10 C) AND ALSO REBATE UNDER S .89 IN RESPECT OF THE AMOUNT RECEIVED OF RS.5 LAKHS ON ACCOUNT OF VOLUNTARY RETIREM ENT. II. CIT VS. KOODATHIL KALLYATAN AMBUJAKSHAN (2009) 309 ITR (BORN) - IN THIS CASE THE HONBLE HIGH COURT OF BOMBAY HELD THAT THE OBJECT IN ENACTING SECTION 10(1CC) OF THE INCOME TAX ACT 1961 WAS TO REDUCE EMPLOYEE STRENGTH SO THAT UNWANTED PERSONNEL C OULD SEEK VOLUNTARY RETIREMENT THEREBY ENABLING THE PUBLIC SECTOR TO ACHIEVE THE TIME OBJECT OR WHICH IT WAS ESTABLISHED. RULE 2BA OF THE INCOME TAX RULES 1962 LAYS DOWN THE GUIDELINES FOR PURPOSE OF SECTION 10(1CC). IT WAS HELD THAT THE SCHEME SATISFIED A LL THE CONDITIONS LAID DOWN IN RULE 2BA. IT SATISFIED THE FIRST TEST, NAMELY, 10 YEARS OF SERVICE OR 40 YEARS OF AGE. THE ASSESSEE HAD PUT IN 25 YEARS OF SERVICE AND 50 YEARS OF AGE. SECONDLY, IT APPLIED TO ALL THE EMPLOYEES. THE MATERIAL ON RECORD WOULD I NDICATE THAT THE EMPLOYEES HAD BEEN RENDERED SURPLUS ON ACCOUNT OF VARIOUS STEPS TAKEN BY THE EMPLOYER. THE SCHEME, THEREFORE, WAS MEANT FOR AN OVERALL REDUCTION IN THE EXISTING STRENGTH OF THE EMPLOYEES. THE THIRD REQUIREMENT WAS ALSO, THEREFORE, SATISFIE D. THE FOURTH REQUIREMENT WAS THAT VACANCIES CAUSED BY THE VOLUNTARY RETIREMENT OR VOLUNTARY SEPARATION WERE NOT TO BE FILLED UP. ADDITIONAL EVIDENCE TAKEN ON RECORD U/S. 260A(7) SHOWED THAT NONE OF THESE POSTS FROM THE DAY THE SCHEME CAME INTO FORCE TILL 2008 HAD BEEN FILLED IN. IN OTHER WORDS, THE FOURTH REQUIREMENT HAD ALSO BEEN SATISFIED. CONSIDERING THAT THE RBI IS A STATUTORY BODY CREATED UNDER AN ACT THERE IS NO OTHER COMPANY OR CONCERN BELONGING TO THE SAME MANAGEMENT. THE FIFTH REQUIREMENT HAD ALSO BEEN SATISFIED. THE SIXTH REQUIREMENT HAD ALSO BEEN SATISFIED AS IN THE INSTANT CASE WHAT WAS OFFERED WAS TWO MONTH SALARY FOR EACH COMPLETED YEAR OF SERVICE. THUS, THE SCHEME EXPRESSLY OR IMPLIEDLY SATISFIED ALL THE REQUIREMENTS OF THE SECTION AS 4 . ITA NO.135/PNJ/2014 (A.Y.2008 - 09) ITO VS. SMT. SUVARNA BASAVARAJ KOTI WELL A S THE GUIDELINES FRAMED FOR THE PURPOSE OF SECTION 10(1OC), NAMELY, RULE 2BA. THE AMOUNT RECEIVED BY THE ASSESSEE UNDER THE OPTIONAL EARLY RETIREMENT SCHEME OF RESERVE BANK OF INDIA WAS ELIGIBLE F OR EXEMPTION UNDER SECTION 10(10 C). FOR THE AMOUNTS IN EXCES S OF RS.5 IAKHS RECEIVED UNDER THE OPTIONAL EARLY RETIREMENT SCHEME, THE ASSESSEE WOULD BE ENTITLED TO THE BENEFITS UNDER SECTION 89 IN ADDITION TO THE BENEFI TS AVAILABLE UNDER SECTION 10(10 C). III. SUBSEQUENT TO THE DECISION OF THE HONBLE HIGH COURT SUP RA, THE BOARD HAS ISSUED CIRCULAR F.NO.173(1)/32/2009 - ITA - 1 DATED 08.05.2009, THE CONTENT OF THE SAID C IRCULAR IS REPRODUCED AS UNDER CENTRAL BOARD OF DIRECT TAXES VIDE ITS LETTER F.NO.225/74/ 2005 - ITA - IL DATED 20.10.2005 RELYING ON A LETTER FROM RE SERVE BANK OF INDIA (RBI ), HAD ADVISED ALL FIELD FORMATIONS THAT THE OPTIONAL EARLY RETIREMENT SCHEME (QERS) OF RBI DOES NOT CONFORM WITH THE PROVISIONS OF RULE 2BA OF INCOME TAX RULES, 1962. ACCORDINGLY, THE AMOUNT RECEIVED BY THE EMPLOYEES OF RB) OPTING FOR OERS DID NOT QUALIFY FOR EXEMPTION UNDER SECTION 10(1OC) OF THE INCOME TAX ACT, 1961. IT HAS BEEN BROUGHT TO THE NOTICE OF THE BOARD THAT THE HO NB!E HIGH COURT OF BOM BAY VIDE ITS ORDER DATED 4TH JULY 2008 IN THE CASE OF COMMISSIONER OF INCOME TAX VS . KO DATHII KALLYATAN AMBUJAKSHAN (2008) 219 CTR (BORN) 80 HAS HELD THAT OPTIONAL EARLY RETIREMENT SCHEME OF RB) SATISFIES ALL THE CONDITIONS OF RULE 2BA AND AMOUNTS RECEIVED BY RETIRING EMPLOYEES THERE UND ER WERE FOR EXEMPTION U/S. 10(10 C). THAT JUDGMENT H AS BECOME FINAL. THE MATTER HAS THEREFORE BEEN REVIEWED IN THE BOARD IN VIEW OF THE AFORESAID ORDER OF HONBLE HIGH COURT OF BOMBAY AND IT HAS BEEN DECIDED THAT THE EMPLOYEES OF RBI WHO ACCEPTED O ERS WOULD BE ENTITLED FOR THE BENEFIT OF SECTION 10(10 C) OF THE INCOME TAX ACT, 1961. IN VIEW OF THIS, I AM DIRECTED TO REQUEST YOU TO BRING THIS TO THE NOTICE OF ALL OFFICERS WORKING UNDER YOUR CHARGE FOR TAKING NECESSARY ACTION. 8. THE CIRCULAR ISSUED BY THE CBDT IS APPROVED BY THE HONBLE SUPREME COURT IN THE C ASE OF CHANDRA RANGANATHAN AND OTHERS VS. CIT (2010) REPORTED IN 235 CTR (SC) 365 (2010) 326 ITR 49 WHICH IS REPRODUCED AS UNDER 2. THESE APPEALS ARE DIRECTED AGAINST THE ORDER PASSED BY THE MADRAS HIGH COURT IN SEVERAL TAXAP PEAL CASES WHERE THE QUESTION INVOLVED WAS WITH REGARD TO THE DEDUCTION AVAILABLE TO THE APPELLANTS U/S. 10(1OC) OF THE IT ACT, 1961. THE ORDER OF THE CIT(A)LV CHENNAL RELATING TO THE ASST. YEAR 2004 - 05, WAS QUESTIONED BEFORE THE TRIBUNAL, CHENNAL BENCH, IN ITA NO.986/MAD/2007, AND OT HER CONNECTED APPEALS, WHICH WERE DISPOSED OF BY THE TRIBUNAL UPHOLDING THE CLAIM FOR DEDUCTION MADE BY THE APPELLANTS. THE SAME WAS THE SUBJECT - MATTER OF THE TAX APPEAL CASES BEFORE THE 5 . ITA NO.135/PNJ/2014 (A.Y.2008 - 09) ITO VS. SMT. SUVARNA BASAVARAJ KOTI BOMBAY HIGH COURT, WHICH REFERS TO THE ORDER OF THE TRIBUNAL ON THE B ASIS OF LETTER F.NO.225/2005 - 1TA - LL DATED 20TH OCTOBER, 2005, OF THE CBDTSO FAR AS THE RB! IS CONCERNED. THE HIGH COURT HELD THAT HAVING REGARD TO THE ABOVE LETTER OF THE CBDT, THE AMOUNT RECEIVED BY THE EMPLOYEES OF THE RB! OPTING FOR OPTIONAL EARLY RETIR EMENT SCHEME DO NOT QUALIFY FOR DEDUCTION U/S. 10(1OC) OF THE AFORESAID ACT. 3. DURING THE COURSE OF HEARING OF THESE APPEALS, IT WAS BROUGHT TO OUR NOTICE THAT BY THE SUBSEQUENT LETTER DT. 8TH MAY 2009, ISSUED BY THE CBDT, IT WAS INDICATED THAT THE MATTER HAD BEEN REVIEWED ON THE BASIS OF THE JUDGMENT OF THE BOMBAY HIGH COURT DT. 4TH JULY, 2008, IN THE CASE OF CIT. VS. KOODATHIL KALLYATAN AMBUJAKSHAN (2 008) 219 CTR (BOM) 80: (2008) 12 DTR (BOM ) 138: (2009) 309 ITR 113 (BORN) AND IT WAS HELD THA T - AMOUNTS R ECEIVED BY RETIRING EMPLOYEES OF THE RBI WOULD BE ELIGIBLE FOR EXEMPTION UNDER THE AFORESAID PROVISIONS OF THE IT ACT. ON BEHALF OF THE UNION OF INDIA AND THE CIT. THE RESPONDENT HEREIN, IT WAS SUBMITTED THAT IN VIEW OF THE SAID CIRCULAR, THE RESPONDENT WO ULD ALLOW THE BENEFIT OF DEDUCTION TO THE APPELLANTS U/S. 10(1OC) OF THE IT ACT, 1961, AS FAR AS THE RETIRED EMPLOYEES OF THE RBI ARE CONCERNED. 4. HAVING REGARD TO THE ABOVE, THE APPEALS SUCCEED AND ARE ALLOWED. THE IMPUGNED ORDER PASSED BY THE HIGH COUR T IS SET ASIDE AND THAT OF THE TRIBUNAL IS RESTORED. THERE WILL BE NO ORDER AS TO COSTS. IV. SAIL DSP VS. VR EMPLOYEES ASSOCIATION 1998 VS. UNION OF INDIA (2003 262 I TR 638 (CAL) - IN THIS CASE IT HAS BEEN HELD THAT - SECTION 10(10 C) OF THE ACT, 1961, U SES THE EXPRESSION ANY AMOUNT RECEIVED BY AN EMPLOYEE ...... AT THE TIME OF HIS VOLUNTARY RETIREMENT IN ACCORDANCE WITH ANY SCHEME OR SCHEMES OF VOLUNTARY RETIREMENT IF A PLAIN LITERAL INTERPRETATION OF STATUTORY PROVISION PRODUCED A MANIFESTLY ABSURD AN D UNJUST RESULT, WHICH THE LEGISLATURE COULD NOT HAVE INTENDED, THE COURT IS SUPPOSED TO MODIFY THE LANGUAGE USED BY THE LEGISLATURE, EVEN TO DO SOME VIOLENCE TO IT SO AS TO ACHIEVE THE OBVIOUS INTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL CONSTRUCTI ON. AN EXPRESSION USED IN THE STATUTE IS NOT ALWAYS TO BE INTERPRETED LITERALLY OR GRAMMATICALLY. SOMETIMES IT HAS TO BE INTERPRETED HAVING REGARD TO THE CONTEXT IN WHICH THE EXPRESSION IS USED AND HAVING REGARD TO THE OBJECT AND PURPOSE FOR W HICH THE SAME IS ENACTED. SEC.10(10 C) WAS INSERTED IN ORDER TO MAKE VOLUNTARY RETIREMENT ATTRACTIVE SO AS TO REDUCE HUMAN COMPLEMENTS FOR SECURING ECONOMIC VIABILITY OF CERTAIN COMPANIES. THIS OBJECT WAS ELABORATED BY VARIOUS DEPARTMENTAL CIRCULARS AND EXPLANATORY STAT EMENTS ISSUED FROM TIME TO TIME. SIMILARLY, RULE 2BA OF THE IT RULES, 1962, WHICH WAS INSERTED BY THE IT (SIXTEENTH AMENDMENT) RULES, 1992, WAS AMENDED FROM TIME TO TIME. ALL THESE GO TO SHOW THAT THIS WAS INTENDED TO MAKE VOLUNTARY RETIREMENT MORE ATTRACT IVE AND BENEFICIAL TO THE EMPLOYEE OPTING FOR VOLUNTARY RETIREMENT. THEREFORE, THIS HAS TO BE INTERPRETED IN A MANNER BENEFICIAL TO THE OPTEE FOR VOLUNTARY RETIREMENT, IF THERE IS ANY AMBIGUITY. .................. 6 . ITA NO.135/PNJ/2014 (A.Y.2008 - 09) ITO VS. SMT. SUVARNA BASAVARAJ KOTI SUMS PAID ON VOLUNTARY RETIREMENT TO THE EXTENT OF RUPEES FIVE IAKHS ARE EXEMPTED FROM BEING CHARGED TO TAX BY REASON OF S.1O(1OC). EVEN IF THE PAYMENT IS STRETCHED OVER A PERIOD OF YEARS, THE SAME WOULD NOT BECOME CHARGEABLE TO TAX IN ANY SUBSEQUENT ASSESSMENT YEAR. V. IN SAKTIPADA MALLICK AND OTHERS VS. INCOME AX OFFICER WARD 27(2) KOLKATA AND OTHERS IN W.P. NO.1262 OF 2005 DATED 22.07.2009 WHEREIN IT IS HELD THAT - IT MAY NOT BE OUT OF PLACE TO MENTION THAT THE CALCUTTA HIGH COURT WHILE DEALING WITH THE WRIT PETITION IN 4957/W/04 IN ITS OPER ATIVE PARA HAS EXPRESSED THE FOLLOWING VIEW - PRIMA FACIE, IT APPEARS THAT MONEY RECEIVED ON ACCOUNT OF VOLUNTARY RETIREMENT UPTO THE SUM OF RS.5 LAKHS WAS NOT TAXABLE. THE RESERVE BANK OF INDIA, IT APPEARS, WAS CONSCIOUS OF THE LEGAL POSITION AND THAT IS WHY IT WENT IN FOR ADVICE IN THE MATTER. THE CORRECTNESS OF THE ADVICE RENDERED TO THEM, HOWEVER, APPEARS TO BE DOUBTFUL. THIS COURT, HOWEVER, DOES NOT PASS ANY OPINION WITH REGARD THERETO THIS WILL ANSWER WHETHER THE OPINION EXPRESSED BY THE CHARTERED A CCOUNTANT ON THE ISSUE WILL MAKE THE SUM IN QUESTION TAXABLE. NEITHER THE OPINION OF THE CHARTERED ACC OUNTANTS NOR THE VIEW OF THE RBI WILL FINALLY DETERMINE THE FATE OF EXEMPTION THAT IS CLAIMED U/S. 1 0 (10 C) BUT THE SATISFACTION OF THE CONDITIONS OR GUID ELINES LAID DOWN BY THE I.T. RUL ES, 1961. A PLAIN READING OF SECTION AND GUIDELINES OF RULE 2BA SHOWS THAT THE SCHEME IN QUESTION LEAVES NO DOUBT IN OUR MINDS THAT THE SUM IN QUESTION ARE CLEARLY EXEMPT UNDER SECTION 10(10 C) OF THE ACT UPTO THE EXTENT OF R S.5 LAKHS. SINCE THE ISSUE INVOLVED IS IDENTICAL; ADHERING TO THE DOCTRINE OF DECISION, WE SET ASIDE THE ORDER OF LOWER AUTHORITIES AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THE RESULT, THE APPEALS BY THE ASSESSES ARE ALLOWED. FURTHER IT WAS AL SO HELD THAT SECTION 1O(1OC) OF THE INCOME TAX ACT 1961 WAS APPLICABLE TO THE OERS INTRODUCED BY RESERVE BANK OF INDIA AND SET ASIDE THE ORDER OF ASSESSMENT ORDER IN THE WRIT APPLICATIONS. VI. CIT VS. P.SURENDA PR ABHU (2005) 279 ITR 402 (KAR) - IN THIS CASE THE HONBLE KAMA TAKA HIGH COURT HAS HELD THAT S.10(L0 C ) WAS INSERTED BY THE FINANCE ACT, 1987. THE EXEMPTION PROVIDED UNDER THE SUB - SECTION WOULD COVER PAYMENTS MADE AT THE TIME OF VOLUNTARY RETIREMENT OR TERMINATION OF AN EMPLOYEE IN ACCORDANCE WITH AN Y SCHEME OR SCHEMES OF VOLUNTARY RETIREMENT. THE EXEMPTION ALLOWED UNDER THIS SUB - SECTION IS ONLY TO AN EXTENT OF RUPEES FIVE LAKHS. THE SECOND PROVISO PROHIBITS AN EMPLOYEE RECEIVING THE EXEMPTION U/S. 10(10 C) MORE THAN ONCE. THE PROVISO MAKES IT CLEAR TH AT ONCE AN EMPLOYEE HAS TAKEN THE BENEFIT OF EXE MPTION FROM TAX PROVIDED U/S. 10 (1 0 C), HE WILL NOT BE ALLOWED TO CLAIM EXEMPTION IN ANY OTHER ASSESSMENT YEAR. THIS IS ONLY TO PREVENT THE MISUS E OF THE PROVISIONS OF SECTION.10(10 C) OF THE ACT BY EMPLOYEES, WHO COULD JUMP FROM ONE EMPLOYER TO ANOTHER EMPLOYER AND TAKE THE BENEFIT UNDER T HE PROVISIONS OF SECTION 10(10 C) OF THE ACT. SECONDLY, THE PROVISO APPENDED TO THE SECTION SPEAKS OF EXEMPTION AND NOT RELIEF AS ENVISAGED UNDER SECTION 89(1) OF THE ACT. IF AN EXEMPTION UNDER THE ACT IS CLAIMED AND GRANTED BY THE AO FOR ANY ASST. YEAR, THE 7 . ITA NO.135/PNJ/2014 (A.Y.2008 - 09) ITO VS. SMT. SUVARNA BASAVARAJ KOTI ASSESSEE WILL NOT BE ELIGIBLE TO CLAIM EXEMPTION IN RELATION TO ANY OTHER ASSESSMENT YEAR. THE SECOND PROVISO WILL NOT BAR THE ASSESSEE TO CLAIM RELIEF U/S. 89(1) OF THE ACT ON THE AMOUNT RECEIVED BY WAY OF COMPENSATION ON VOLUNTARY RETIREMENT FROM SERVICE. RULE 2BA OF THE RULES PRESCRIBES THE REQUIREMENTS FOR A SCHEME OF VOLUNTARY RETIREMENT. IT IS A RULE FRAMED FOR THE PURPOSE OF WORKING OUT THE PROVISIONS OF THE ACT AN D IT IS THE SECTION, WHICH PREVAILS OVER HE RULES. THE SECTION SPECIFICALLY SPEAKS OF VOLUNTARY RETIREMENT/TERMINATION FAN EMPLOYEE IN ACCORDANCE WITH THE SCHEME TO BE ENTITLED FOR THE BENEFIT OF EXEMPTION UNDER THE SECTION AND MERELY BECAUSE R.2BA OF THE RULES DOES NOT SPEAK OF TERMINATION, IT CANNOT BE CONCLUDED THAT A PERSON WHO CL AIMS EXEMPTION U/S. 10(10 C) IS NOT ENTITLED TO CLAIM RELIEF U/S. 89. THE ASSESSEE WAS AN EMPLOYEE OF CANARA BANK, A NATIONALIZED BANK. THE ASSESSEE OFFERED FOR VOLUNTARY RETIREMENT FROM SERVICE UNDER THE SCHEME FLOATED BY THE BANK. ON ACCEPTANCE OF THE OFFER, THE ASSESSEE RECEIVED FULL AND FINAL SETTLEMENT OF EX GRATIA PAYMENT AND OTHER BENEFITS AS PER THE SCHEME FROM HIS EMPLOYER. IN THE RETURN OF INCOME FILED FOR THE ASS T. YEAR 2001 - 02, THE ASSESSEE CLAIMED EXEMPTION TO THE EXTENT OF RS.5 LAKHS RECEIVED UNDER THE VOLUNTARY RETIREMENT SCH EME FROM HIS EMPLOYER U/S. 10(10 C) OF THE ACT AND ALSO RELIEF U/S. 89(1) OF THE ACT IN RESPECT OF THE AMOUNT RECEIVED IN EXCESS OF RS.5 L AKHS FROM HIS EMPLOYER. THE ASSESSEES CLAIM WAS REJECTED BY THE AO. THE CIT (A) GRANTED THE ASSESSEE RELIEF U/S.89(1) AND THIS WAS UPHELD BY THE TRIBUNAL. THE TRIBUNAL ALSO ALLOWED APPEALS BY THE BANK AGAINST ORDERS HOLDING THE BANK AN ASSESSEE IN DEFAULT U/S. 201(1) AND LEVYING INTEREST U/S. 201(1A) FOR SHORT DEDUCTION OF TAX AT SOURCE OR SUMS OVER AND ABOVE THE EXEMPTION OF RS.5 LAKHS. ON WHICH IT ALLOWED RELIEF U/S. 89(1). ON APPEALS TO THE HIGH COURT BY THE ASSESSEE AND REVENUE: HELD, (I) THAT THE ASSE SSEE, EMPLOYEE OF THE RESPONDENT - BANK WAS NOT ONLY ENTITLED TO THE BENEFIT OF EXEMPTIO N U/S. 10(10 C) OF THE ACT TO THE EXTENT PRESCRIBED IN THE PROVISION ITSELF BUT FOR ANY AMOUNT OVER AND ABOVE THE PRESCRIBED LIMIT UNDER THE AFORESAID PROVISION, THE ASSES SEE WAS ALSO ENTITLED TO RELIEF U/S. 89(1) OF THE ACT R.W RULE 21A. VII . K.ANBALAKAN VS. STATE BANK OF INDIA AND OTHERS IN W.P. NO.5608 OF 2006 (TIT) DATED 30.08.2006 IN THIS CASE WRIT PETITION WAS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE STATE BANK OF INDIA (RESPONDENT NO.1) TO MAKE FULL PAYMENT OF EX - GRATIA PAYABLE TO THE PETITIONER PURSUANT TO HIS VOLUNTARY RETIREMENT UNDER THE EXIT OPTION SCHEME WITHOUT ANY DEDUCTION OR RECOVERY AS TAX DEDUCTION AT SOURCE TO WARDS INCOME TAX ON THE SAID EX - GRATIA AMOUNT EXCEPT AFTER GRANTING RELIEF UNDER SECTION 10(1OC) AND 89(1) OF THE INCOME TAX ACT 1961. 9. THE HONBLE HIGH COURT OF KARNATAKA HELD THAT THE QUESTION TO BE DECIDED IN THAT WRIT PETITION IS SQUARELY COVERED BY THE JUDGMENT PASSED BY THE DIVISION BENCH OF THE COURT IN THE CASE OF CIT VS. SRI. SURENDRA PRABHU P AND ANOTHER REPORTED IN (ILR 2005 KAR 5906)(2005) 279 ITR 402 (KAR). IN VIEW OF THE AFORESAID JUDGMENT, THE HONBLE HIGH COURT GRANTED RELIEF SOUGHT FOR I N THE WRIT PETITION. 10. IN THE INSTANT CASE THE APPELLANT SERVED FOR A PERIOD OF MORE THAN 25 YEARS AND AT THE TIME OF RETIREMENT SHE WAS VERY MUCH MORE THAN 40 YEARS. THIS WAS EXIT OPTION SCHEME OF STATE BANK OF INDIA TO REDUCE THE STAFF. IT WAS CONTEND ED THAT IT WAS JUST 8 . ITA NO.135/PNJ/2014 (A.Y.2008 - 09) ITO VS. SMT. SUVARNA BASAVARAJ KOTI IMPOSSIBLE TO CONTINUE IN THE NEW ENVIRONMENT OF COMPUTERIZATION APPLIED TO THE WORKERS AND OFFICERS. IT IS ALSO STATED THAT THE SCHEME HAS RESULTED IN OVERALL REDUCTION OF THE EMPLOYEES. THE APPELLANT HAS FURNISHED A DECLARATION THAT H E HAS NOT ACCEPTED ANY COMMERCIAL EMPLOYMENT IN ANOTHER COMPANY OR CONCERN BELONGING TO THE SAME MANAGEMENT. THE AMOUNT RECEIVED ON VRS IS CALCULATED AS PER GUIDELINES. HE RECEIVED EX - GRATIA AMOUNT OF RS.5,00,000/ - WHICH DOES NOT EXCEED THE AMOUNT EQUIVALE NT TO THREE MONTHS SALARY. 11. FROM THE FACTS NARRATED ABOVE, IT IS SEEN THAT ALL THE CONDITIONS L AID DOWN UNDER RULE 2BA OF THE I .T. RULES ARE FULFILLED. EVEN IN CASE WHEN EMPLOYEE HAS DEDUCTED TAX ON EXGRATIA PAYMENT OR SCHEME DO NOT COMPLY WITH GUIDEL INES UNDER RULE 2BA, INDIVIDUALLY, EVEN THEN THE APPELLANT ENTITLED TO GET EXEMPTION U/S. 10(1OC) AS HELD BY THE HONBLE ITAT, MUMBAI IN THE CASE OF PETRIC I BRITTO AND OTHERS VS. ITO ITA NO. 4493/MUMBAI/2006, HONBLE ITAT OF KOLKATTA IN THE CASE OF DY. CI T VS. KRISHNA GOPAL SHAH (2009) 125TTJ (KOL) (TM) 557 AND DECISION OF HONBLE ITAT, AHMEDABAD IN PANDYA VINOD CHANDRA BHOGILAL V. ITO (2010 133 TTJ (AHD) 253. 12. A P ERUSAL OF THE ASSESSMENT ORDER - THE AO REFERRED THE BOARDS INSTRUCTIONS F.NO.200/34/2009 ITA I DATED 06.10.2009 THEREBY IT HAS BEEN CLARIFIED THAT THE EXIT OPTION SCHEME OF STATE BANK OF INDIA AND STATE BANK OF PATIALA ARE NOT IN ACCORDANCE WITH RULE 2BA AND ACCORDINGLY SUCH CASES TO BE REVIE WED. IT IS OBSERVED THAT THE CIRCULAR ISSUED BY THE CBDT IMPLIED THAT EXIT OPTION NOTIFIED BY THE STATE BANK OF INDIA AND STATE BANK OF PATIALA ARE NOT IN ACCORDANCE WITH RULE 2BA AND SUGGESTED TO REVIEW SUCH CASES. HOWEVER AS PER THE DECISIONS OF HONBLE ITAT MUMBAI, KOLKATTA AND AHMEDABAD, CITED ABOVE IT HAS BEEN HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S. 10(10 C) EVEN THOUGH THE VOLUNTARY SEPARATION SCHEME IS NOT IN CONFORMITY WITH THE REQUIREMENT OF RULE 2BA. 13. IN THIS CONTEXT, IT IS RELEVANT TO MENTION THE OBSERVATION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. HERO CYCLE PVT. LTD., AND OTHERS (1997) 228 ITR 463 WHEREIN IT IS HELD THAT - MORE - OVER, IT IS WELL SETTLED THAT CIRCULARS CAN BIND THE INCOME TAX OFFICER BUT WILL NOT BIND T HE APPELLATE AUTHORITY OR THE TRIBUNAL OR THE COURT OR EVEN THE ASSESSEE. 14. IN THE LIGHT OF DETAILED DISCUSSION MADE ABOVE, FACTS AS WELL AS THE LEGAL POSITION, IN MY CONSIDERED OPINION THAT APPELLA NT IS ENTITLED EXEMPTION U/S. 10 (1 0 C) OF THE ACT. THE ASSESSING OFFICER IS THEREFORE, DIRECTED TO ALLOW EXEMPTION TO THE EXTENT OF RS.5,00,000/ - OUT OF AMOUNT RECEIVED TOWARDS EX - GRATIA PAYMENTS. 4 . WE HAVE GONE THROUGH THE ORDER OF CIT(A) AND WRITTEN SUBMISSION FILED BY THE ASSESSEE. WE ARE OF THE VIEW THAT THE CIT(A) HAS ANALYSED VARIOUS JUDGEMENTS RENDERED BY TRIBUNAL AND HIGH COURTS VIS - A - VIS SCHEME OF THE BANK AND CONDITION MENTIONED IN RULE 2BA AND HELD THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10(10C) SINCE ALL THE REQUIREMENTS OF RULE 2BA ARE SATISFIED. 9 . ITA NO.135/PNJ/2014 (A.Y.2008 - 09) ITO VS. SMT. SUVARNA BASAVARAJ KOTI MOREOVER BOTH CIRCULARS ARE NOT BINDING TO THE TRIBUNAL. WE FIND THAT THE CIT(A) HAS RELIED UPON THE DECISION OF TRIBUNAL IN CASE OF PATRIC I BRITTO & ORS. VS. ITO , ITA NO. 4493/MUMBAI/2006 AND VARIOUS DECISION OF THE TRIBUNAL. WE FIND THAT THE TAX EFFECT INVOLVED IN THE PRESENT APPEAL FILED BY THE REVENUE IS LESS THAN RS. 3 LACS, AND THEREFORE, THE APPEAL IS NOT MAINTAINABLE. THE REVENUE FIL ED THE APPEAL ON 20.09.2013 AND AS PER THE CBDTS LATEST CIRCULAR INSTRUCTION NO. 3/2011 UNDER F. NO. 279/MISC.142/2007 - ITJ DATED 9 TH FEBRUARY, 2011, THE APPEAL SHOULD NOT BE ENTERTAINED. IN VIEW OF THE INSTRUCTIONS OF THE CBDT SINCE THE TAX EFFECT IS LES S THAN RS. 3 LACS, THEREFORE, WE DISMISS THE APPEAL OF THE R EVENUE . 3. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 8 . 08.2014. S D / - S D / - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PL ACE : PANAJI / GOA DATED : 0 8 .08 .2014 P.S. - *PK* COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER
