Shri Vishnu Mohan T. Nair, Baroda V. The Income Tax Officer, Ward-8(3), Baroda

ITA 1472/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6368 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH DATES OF HEARING OF
• Section: 143(3); 133(6); 10

Judgement Text

ITA NO. 1472/AHD/14 ASSESSMENT YEAR: 2008-09 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S S GODARA JM] ITA NO. 1472/AHD/2014 ASSESSMENT YEAR: 2008-09 VISHNU MOHAN T NAIR ...........APPELLA NT 7/1670 SANSKAR NAGAR NEAR GAYATRI NAGAR, GOTRI ROAD VADODARA 390 021 [PAN: AATPN6677P] VS INCOME TAX OFFICER WARD 8(3), VADODARA .......RESPONDENT APPEARANCES BY URVASHI SHODHAN FOR THE APPELLANT V K SINGH FOR THE RESPONDENT DATES OF HEARING OF THE APPEAL : OCTOBER 11, 20 17 DATE OF PRONOUNCING THIS ORDER : JANUARY 02, 2 018 O R D E R PER PRAMOD KUMAR, AM: 1. THIS APPEAL CALLS INTO QUESTION CORRECTNESS OF T HE ORDER DATED 3 RD FEBRUARY 2014 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SEC TION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FO R THE ASSESSMENT YEAR 2008-09. 2. WHEN THIS APPEAL WAS CALLED OUT FOR HEARING, LEA RNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SHORT GRIEVANCE THAT SHE WOULD L IKE TO PRESS, IN THIS APPEAL, IS AGAINST LEARNED CIT(A)S HOLDING THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEE IS NOT ENTITLED TO EXEMPTION OF RS 5,00,000 UNDER S ECTION 10(10B) OF THE ACT. 3. THE ISSUE IN APPEAL LIES IN A NARROW COMPASS OF FACTS. THE ASSESSEE BEFORE US IS A FORMER EMPLOYEE OF A VADODARA BASED COMPANY. THE AS SESSEE HAD TAKEN UP EMPLOYMENT IN THIS COMPANY IN TERMS OF THE APPOINTMENT LETTER DAT ED 25 TH OCTOBER 1990, AND THIS EMPLOYMENT WAS CONFIRMED VIDE LETTER DATED 26 TH MARCH 1991. IT APPEARS THAT ON 21 ST JULY 2003, HE WAS TRANSFERRED OUT OF VADODARA AND WAS AS KED TO JOIN AT MUMBAI. THIS TRANSFER, ON THE PECULIAR FACTS OF THIS CASE, WAS CONSIDERED, BY THE ASSESSEE, TO BE A CHANGE IN HIS SERVICE CONDITION- A PLEA WHICH WAS UPHELD BY THE INDUSTRIA L TRIBUNAL. IN ITS ORDER DATED 28 TH OCTOBER 2004, THE INDUSTRIAL TRIBUNAL, INTER ALIA, HELD AS FOLLOWS: ITA NO. 1472/AHD/14 ASSESSMENT YEAR: 2008-09 PAGE 2 OF 6 FROM THE PERUSAL OF TRANSFER ORDER, IT IS ABUNDANT LY CLEAR THAT THE OPPONENT COMPANY HAS ALTERED THE SERVICE CONDITIONS APPLICAB LE TO THE COMPLAINANT IMMEDIATELY BEFORE THE COMMENCEMENT OF DISPUTE RAIS ED IN REFERENCE (IT) NO 6/2003. IN THIS VIEW OF THE MATTER, I AM OF THE OPI NION THAT OPPONENT COMPANY HAS COMMITTED BREACH OF SECTION 33 OF THE INDUSTRIA L DISPUTE ACT, 1947, AND, THEREFORE, THE TRANSFER ORDER IS QUASHED AND SET AS IDE 4. THE COSTS OF PROCEEDINGS BEFORE THE INDUSTRIAL T RIBUNAL WERE ALSO AWARDED TO THE ASSESSEE, AND QUANTIFIED AT RS 5,000. THE ORDER SO PASSED BY THE INDUSTRIAL TRIBUNAL WAS CHALLENGED, BY THE ASSESSEES EMPLOYER, BEFORE HON BLE GUJARAT HIGH COURT. ON 16 TH MARCH 2005, IT APPEARS, CERTAIN INTERIM ARRANGEMENTS WERE APPROVED BY HONBLE HIGH COURT. HOWEVER, WHEN THE MATTER CAME UP FOR FINAL HEARING ON 25 TH JUNE 2007, HONBLE HIGH COURT WAS INFORMED THAT BOTH THE PARTIES ARRIVED AT SETTLEMENT DATED 21 ST APRIL 2007 WHEREIN EX GRATIA AMOUNT IS DIRECTED TO BE PAID TO THE RESP ONDENT AT RS 6,50,000 AND THE ASSESSEE CEASES TO BE IN EMPLOYMENT OF THE SAID EMPLOYER. HO NBLE HIGH COURT ALSO NOTED THE SUBMISSION OF THE EMPLOYERS COUNSEL THAT AMOUNT OF PROVIDENT FUND, GRATUITY, LEAVE ENCASHMENT AND OTHER SERVICE BENEFITS, WHICH ARE AV AILABLE TO THE RESPONDENT WILL BE PAID BY THE PETITIONER (I.E. THE EMPLOYER) WITHIN A PERIOD OF THREE WEEKS FROM THE DATE OF RECEIVING THE COPY OF THIS ORDER . ALL THESE FACTS AND SUBMISSIONS WERE TAKEN ON R ECORD, AND, AS NOTED BY HONBLE HIGH COURT, ORDER PASSED BY THE TRIBUNAL WAS MODIFIED TO THAT EXTENT . IT WAS IN THIS BACKDROP THAT THE ASSESSEE WAS P AID RS 6,50,000, AS AN EX GRATIA AMOUNT BY THE EMPLOYER, AT THE POINT OF TIME OF LEA VING THE EMPLOYMENT. 5. THE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10( 10B) IN RESPECT OF THE ABOVE EX GRATIA AMOUNT THAT HE RECEIVED. THIS AMOUNT WAS TRE ATED AS COMPENSATION AT THE TIME OF RETRENCHMENT OF THE ASSESSEE. THE ASSESSING OFFICER , DECLINED THE CLAIM, ON THE GROUND THAT IT WAS (A) AN EX GRATIA PAYMENT AND NOT A COMPENSATION ; AND (B) THE STATUS OF THE EMPLOYEE, IN TERMS OF THE DOCUMENTATION ON RECORD, WAS OF A RESI GNED EMPLOYEE AND NOT A RETRENCHED EMPLOYEE. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. WHILE DECLINING THE CLAIM OF THE ASSES SEE, LEARNED CI(A) OBSERVED AS FOLLOWS: 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRC UMSTANCES OF THE CASE, THE OBSERVATIONS OF THE AO, THE SUBMISSIONS OF THE AS SESSEE, MATERIAL AVAILABLE ON RECORD AND THE JUDICIAL PRONOUNCEMENTS ON THE SUBJ ECT. FROM THE PERUSAL OF THE ORDERS OF INDUSTRIAL TRIBUNAL AND HON'BLE GUJARAT H IGH COURT, IT IS CLEAR THAT THE WHOLE DISPUTE BEFORE THEM WAS ON ACCOUNT OF ASSESSE E'S TRANSFER TO MUMBAI FROM VADODARA AND NOT ON ACCOUNT OF RETRENCHME NT OF THE ASSESSEE, AS CLAIMED BY THE ASSESSEE. PARA 1 OF THE ORDER DATED 28.10.2004 OF INDUSTRIAL TRIBUNAL CLEARLY STATES THAT, THE COMPLAINT WAS FILED, 'PRAYING THAT HE SHOULD NOT BE TRANSFERRED TO MUMBAI.'THERE WAS NO REFERENCE TO RETRENCHMENT IN T HIS ORDER AND WHOLE OF THE ORDER DEALS WITH HER TRANSFER TO MUMBAI AND NOT THE ISSUE OF RETRENCHMENT. AFTER THE ABOVE REFERRED ORDER OF THE INDUSTRIAL TRIBUNAL WAS DELIV ERED, ASSESSEE'S EMPLOYER FILED A CASE IN HON'BLE GUJARAT HIGH COURT, CHALLENGING THE AWARD PASSED BY THE INDUSTRIAL TRIBUNAL WITH REFERENCE TO ASSESSEE'S TRANSFER AND NOT WITH REFERENCE TO HER RETRENCHMENT OR COMPENSATION THEREOF. THE A/R HAS C LAIMED IN PARA 4.4 (B) OF HIS ITA NO. 1472/AHD/14 ASSESSMENT YEAR: 2008-09 PAGE 3 OF 6 SUBMISSION THAT AT THIS STAGE, HE WAS TERMINATED, B UT THERE IS ABSOLUTELY NO EVIDENCE OF THE SAME. THE RECORDS DO NOT SHOW THAT THE ASSESSEE WAS EVER RETRENCHED/TERMINATED AT THIS STAGE. THIS ASSERTION OF THE A/R IS FACTUAL LY INCORRECT. IN PARA 4.4(C) OF HIS SUBMISSION, THE A/R HAS ALSO SUBMITTED THAT THE IND USTRIAL TRIBUNAL HAD 'ACCEPTED THE PLEA OF THE APPELLANT AND PASSED AN ORDER AFTER HEA RING BOTH THE PARTIES, TO REINSTATE HIM AND AWARD COST.' SIMILAR FACTUALLY INCORRECT AS SERTION HAS ALSO BEEN MADE IN PARA 4.5 OF ASSESSEE'S SUBMISSION. EVEN THIS ASSERT ION OF THE A/R IS FACTUALLY INCORRECT AND AMOUNTS TO MISREPRESENTATION. THE ASSESSEE'S ON LY PLEA BEFORE THE INDUSTRIAL TRIBUNAL WAS FOR QUASHING HER TRANSFER ORDER TO MUM BAI AND 'REINSTATEMENT' WAS NEVER AN ISSUE BEFORE THE TRIBUNAL. IN THE CIRCUMST ANCES, THE TRIBUNAL COULD NEVER HAVE AND DID IN FACT NEVER, PASS AN ORDER FOR ASSES SEE'S 'REINSTATEMENT' AS CLAIMED. THE OPERATIVE PORTION OF THE INDUSTRIAL TRIBUNAL'S ORDER DATED 28.10.2004 READS AS UNDER- 'TRANSFER ORDER DATED 21.07.03 PASSED BY THE OPPONE NT ACNIELSEN ORG-MARG PVT LTD. IS HERE BY QUASHED AND SET ASIDE. 'THIS ORDER DOES NOT DELIBERATE OR ADJUDICATE ON THE ISSUE OF 'REINSTATEMENT' AS CLAIMED BY A/R. 6.4 IT IS CLAIMED BY THE ASSESSEE IN PARA 4.3 OF HIS SUBMISSION THAT THE SAID AMOUNT OF RS. 6,50,000/- WAS RECEIVED BY HIM U NDER INDUSTRIAL DISPUTE ACT, IS ALSO FACTUALLY INCORRECT. THE INDUSTRIAL TRIBUNAL OR HON'BLE GUJARAT HIGH COURT NEVER GRANTED ANY COMPENSATION OR MONETARY AWAR D TO THE ASSESSEE. THEY BOTH ONLY DEALT WITH THE ISSUE OF TRANSFER OF THE ASSESS EE FROM BARODA TO MUMBAI. IN ANY CASE, NO COMPENSATION WAS GRANTED BY THE INDU STRIAL TRIBUNAL TO THE ASSESSEE, AS NONE WAS SOUGHT. THE SAID TRIBUNAL ORDER ONLY QUASH ED ASSESSEE'S TRANSFER ORDER TO MUMBAI AND AWARDED HIM COST OF RS. 5,000/- . THIS AMOUNT OF RS. 6,50,000/- WAS RECEIVED BY HIM AS 'EX-GRATIA' AS A RESULT OF ' OUT OF COURT' SETTLEMENT OF HER DISPUTE WITH HIS EMPLOYER. HIS SERVICES WERE ONLY TERMINATED AFTER HE RECEIVED THE SAID 'EX GRATIA' PAYMENT OF RS. 6,50,000/- AND IT IS NOT IN THE NATURE OF COMPENSATION FOR RETRENCHMENT. THE PAYMENT IS VOLUN TARY AND AS A RESULT OF A PRIVATE SETTLEMENT BETWEEN THE ASSESSEE AND HIS EMPLOYER AN D DOES NOT HAVE THE CHARACTER OF RETRENCHMENT COMPENSATION. EVEN THE EMPLOYER, IN RE SPONSE TO ASSESSING OFFICER'S NOTICE U/S 133(6) HAS CLEARLY SUBMITTED THAT THE NA TURE OF THE PAYMENT WAS 'EX GRATIA' AND NOT 'RETRENCHMENT COMPENSATION'. IN ANY CASE, T HE EMPLOYER WAS UNDER NO LEGAL OBLIGATION TO PAY HIM THE SAID SUM AS THERE WAS NO RETRENCHMENT, AS CLAIMED. 6.5 A/R'S CONTENTION THAT THE ASSESSEE WAS ILLEG ALLY RETRENCHED AND HE HAD NOT RESIGNED IS ALSO NOT BORNE OUT BY THE FACTS ON RECO RD. CLAUSE 3(C) OF THE AGREEMENT DATED 21.04.2007, WHICH WAS PRODUCED BEFORE HON'B LE HIGH COURT, CLEARLY MENTIONS THAT, 'THE RESPONDENT SHALL, UPON RECEIVING SUCH EX -GRATIA PAYMENT, STAND RESIGNED FROM HIS POST AS IT STANDS AT THE PRESENT DAY, WITH OUT ENTERING IN TO DISPUTE OF WHETHER THEY WOULD BE CONSIDERED TO HAVE RESIGNED FROM VADO DARA OR MUMBAI.' THEREFORE, IT IS APPARENT THAT THE ASSESSEE WAS NOT RETRENCHED , BUT HAD DEEMED TO HAVE RESIGNED AFTER RECEIVING THE EX-GRATIA PAYMENT. IN ANY CASE, THIS ISSUE WAS NEVER BEFORE EITHER THE INDUSTRIAL TRIBUNAL OR HON'BLE GU JARAT HIGH COURT, THEREFORE, THERE IS NO QUESTION OF THEIR HAVING ACCEPTED THE SAME, A S CLAIMED BY THE A/R IN PARA 4.5 AND 4.6 OF HIS SUBMISSION. THIS ASSERTION IS ALSO F ACTUALLY INCORRECT AND IS MISLEADING. ITA NO. 1472/AHD/14 ASSESSMENT YEAR: 2008-09 PAGE 4 OF 6 SINCE THE ASSESSEE WAS NOT RETRENCHED, THE DECISION S OF VARIOUS COURTS/TRIBUNALS, CITED BY THE A/R, DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. THEREFORE, IT IS HELD THAT THE SUM OF RS. 6,50,0007- RECEIVED BY THE ASSESSEE FROM HIS EMPLOYER WAS IN THE NATURE OF 'EX-GRATIA' PAYMENT AND DOES NOT HAVE THE CHARACTER OF RETRENCHMENT COMPENSATION. IN VIEW OF THIS, THE ORDER OF THE ASS ESSING OFFICER IN THIS REGARD, DISALLOWING CLAIMED EXEMPTION U/S 10(10B) OF THE AC T, IS UPHELD. THE ASSESSEE FAILS ON THESE GROUNDS OF APPEAL. 6. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 8. THE FUNDAMENTAL ISSUE THAT WE HAVE TO TAKE A CAL L ON IS WHETHER OR NOT THE AMOUNT IN QUESTION RECEIVED BY THE ASSESSEE IS ELIGIBLE FOR E XEMPTION UNDER SECTION 10(10B). AS WE EXPLORE THIS ASPECT OF THE MATTER, WE FIND THAT SEC TION 10 (10B) OF THE INCOME TAX ACT 1961 DEFINES THE AMOUNT ELIGIBLE FOR EXEMPTION UNDER THI S PROVISIONS AS ANY COMPENSATION RECEIVED BY A WORKMAN UNDER THE INDUSTRIAL DISPUTES ACT, 1947 (14 OF 1947), OR UNDER ANY OTHER ACT OR RULES, ORDERS OR NOTIFICATIONS ISS UED THEREUNDER OR UNDER ANY STANDING ORDERS OR UNDER ANY AWARD, CONTRACT OF SERVICE OR O THERWISE, AT THE TIME OF HIS RETRENCHMENT . CLEARLY, THEREFORE, AN ELIGIBLE AMOUNT HAS TO B E IN THE NATURE OF, INTER ALIA, COMPENSATION UNDER THE INDUSTRIAL DISPUTE ACT 1947, AND IT HAS TO BE PAID AT THE TIME OF RETRENCHMENT OF AN EMPLOYEE. AS FOR THE AMOUNT BEIN G IN THE NATURE OF COMPENSATION UNDER THE INDUSTRIAL DISPUTES ACT, IT IS EVIDENT FROM A P LAIN LOOK AT HONBLE HIGH COURTS JUDGMENT DATED 25 TH JUNE 2007, A COPY OF WHICH IS PLACED BEFORE US AS WELL, THAT, WHILE TAKING NOTE OF THE PAYMENT OF RS 6,50,000 BY THE EMPLOYER, IT WAS OBSERVED THAT ORDER PASSED BY THE TRIBUNAL WAS MODIFIED TO THAT EXTENT. THE ORDER PASSED BY THE INDUSTRIAL TRIBUNAL WAS ADMITTEDLY UNDER THE INDUSTRIAL DISPUTES ACT 1947, AND ONCE IT IS HELD THAT THE SAID ORDER STANDS MODIFIED SO AS TO TAKE INTO ACCOUNT THE PAYM ENT OF, INTER ALIA, PAYMENT OF RS 6,50,000 BY THE EMPLOYER, THE SAID PAYMENT CANNOT BUT BE TRE ATED AS A COMPENSATION UNDER THE INDUSTRIAL DISPUTES ACT, 1947. THE FIRST LIMB OF SE CTION 10(10B) IS THUS SATISFIED. THE NEXT QUESTION THEN IS WHETHER THE SAID COMPENSATION CAN BE SAID TO HAVE BEEN PAID AT THE TIME OF RETRENCHMENT. IN ORDER TO FIND ANSWER TO THIS QUEST ION, WE WILL HAVE TO TAKE A LOOK AT THE DEFINITION OF EXPRESSION RETRENCHMENT UNDER SECTI ON 2(OO) OF THE INDUSTRIAL DISPUTES ACT. THIS DEFINITION IS AS FOLLOWS: RETRENCHMENTS' MEANS THE TERMINATION BY THE EMPLOY ER OF THE SERVICE OF A WORKMAN FOR ANY REASON WHATSOEVER, OTHERWISE THAN A S A PUNISHMENT INFLICTED BY WAY OF DISCIPLINARY ACTION BUT DOES NOT INCLUDE- (A) VOLUNTARY RETIREMENT OF THE WORKMAN; OR (B) RETIREMENT OF THE WORKMAN ON REACHING THE AGE O F SUPERANNUATION IF THE CONTRACT OF EMPLOYMENT BETWEEN THE EMPLOYER AND THE WORKMAN CONCERNED CONTAINS A STIPULATION IN THAT BEHALF; OR (BB) TERMINATION OF THE SERVICE OF THE WORKMAN AS A RESULT OF THE NON-RENEWAL OF THE CONTRACT OF EMPLOYMENT BETWEEN THE EMPLOYER AND THE WORKMAN CONCERNED ITA NO. 1472/AHD/14 ASSESSMENT YEAR: 2008-09 PAGE 5 OF 6 ON ITS EXPIRY OR OF SUCH CONTRACT BEING TERMINATED UNDER A STIPULATION ON THAT BEHALF CONTAINED THEREIN; OR] (C) TERMINATION OF THE SERVICE OF A WORKMAN ON THE GROUND OF CONTINUED ILL-HEALTH 9. QUITE CLEARLY, THE EXPRESSION RETRENCHMENT COV ERS TERMINATION OF SERVICE BY THE EMPLOYER FOR ANY REASON WHATSOEVER EXCEPT (I) AS A PUNISHMENT INFLICTED BY DISCIPLINARY ACTION IN ACCORDANCE WITH THE LAW AND (II) COVERED BY THE NEGATIVE LIST APPENDED TO THE DEFINITION OF RETRENCHMENT. IT IS NOT, IT CANNOT BE, THE CASE OF THE REVENUE THAT THE TERMINATION OF SERVICE IS COVERED BY THESE TWO CLAU SES. AS A MATTER OF FACT, CASE OF THE REVENUE IS THAT THERE IS NO TERMINATION AT ALL AS I T IS A RESIGNATION BY THE EMPLOYEE WHICH HAS BEEN ACCEPTED BY THE EMPLOYER AND THE RELIANCE IS P LACED ON THE DOCUMENTATION IN SETTLEMENT DOCUMENTS. SUCH A PLEA IS ONLY FIT TO BE NOTED AND REJECTED. HERE IS A SETTLEMENT AND FOR A CONSIDERATION THAT THE ASSESSEE HAS QUIT EMPLOYMENT , AND THE ASSESSEES LEAVING THE EMPLOYMENT IS DEPENDENT UPON THE PAYMENT BEING MADE BY THE EMPLOYER. RESIGNATION IS A VOLUNTARY AND UNILATERAL ACT; THERE CANNOT BE A RES IGNATION BY THE EMPLOYEE ON PAYMENT OF A COMPENSATION BY THE EMPLOYER. WORDINGS OF THE ARRAN GEMENTS APART, SUCH AN ARRANGEMENT IS DE FACTO AS ALSO IN THE EYES OF LAW AN ARRANGEMENT FOR TERMI NATION OF EMPLOYMENT ON PAYMENT OF COMPENSATION. LETS RECAPITULATE THE BASIC FACTS OF THIS CASE AGAIN. HERE IS A VADODARA BASED EMPLOYEE WHO IS TRANSFERRED TO MUMBAI AND THE EMPLO YEE CONSIDERS SUCH A TRANSFER AS AN ALTERNATION TO THE TERMS OF EMPLOYMENT. HE FIGHTS T HIS TRANSFER ORDER TOOTH AND NAIL AND EVEN WINS THE FIRST ROUND OF LITIGATION BEFORE THE TRIBU NAL. THE MATTER DOES NOT END THERE. HIS EMPLOYER, OBVIOUSLY WITH MUCH BETTER RESOURCES AT H IS DISPOSAL, CARRIES THE MATTER BEFORE HONBLE HIGH COURT. THE LITIGATION DRAGS ON AT AHME DABAD NOW AND WITH THE KIND OF RESOURCES THAT HIS EMPLOYER HAS HIS COMMANDS AND TH ERE IS EVERY POSSIBILITY THAT IT WILL GO ON FOR LONG TIME. DAMOCLES SWORD STILL HANGS ON HIS HE AD AND FOUR YEARS HAVE PASSED ON SINCE HE WAS TRANSFERRED TO MUMBAI. IT IS IN THIS BACKDROP T HAT THE EMPLOYER MAKES HIM AN OFFER, WHICH OBVIOUSLY HE ACCEPTS, THAT IN CASE THE ASSESS EE IS READY TO LEAVE THE EMPLOYMENT, IN ADDITION TO ALL HIS NORMAL TERMINAL DUES, HE GETS R S 6,50,000 AS EX GRATIA COMPENSATION. IN SIMPLE WORDS, IT IS AN OFFER FOR TERMINATION OF HIS EMPLOYMENT BY THE EMPLOYER WITH AN ADDITIONAL PAYMENT OF RS 6,50,0000. IN OUR HUMBLE U NDERSTANDING, THIS IS NOTHING BUT AN OFFER OF TERMINATION OF EMPLOYMENT WITH AN EX GRATIA PAY MENT OF RS 6,50,000- AN OFFER EVENTUALLY ACCEPTED BY THE ASSESSEE. WITH ALL OUR REGARDS TO T HE FINDINGS OF THE AUTHORITIES BELOW, WE ARE NOT INCLINED TO ACCEPT THIS ARRANGEMENT IS A RESIGN ATION BY THE EMPLOYEE. AS FOR THE EMPHASIS PLACED ON THE CLAUSE, IN THE SETTLEMENT DEED, TO TH E EFFECT THAT THE RESPONDENT SHALL, UPON RECEIVING THE EX GRATIA AMOUNT STAND RESIGNED FROM THE POST AS IT STANDS AT THE PRESENT DAY, WITHOUT ENTERING IN TO DISPUTE WHETHER HE WOULD BE CONSIDERED TO HAVE RESIGNED FROM VADODARA OR MUMBAI, AS WE HAVE SAID BEFORE, NOTHIN G REALLY TURNS ON THIS CLAUSE AS WHAT IS TO BE SEEN AS THE FACTUAL AND LEGAL IMPORT OF THE A RRANGEMENT RATHER THAN THE WORDINGS EMPLOYED THEREIN. IN ANY CASE, ONCE WE COME TO THE CONCLUSION, ON AN APPRECIATION OF ALL THE RELEVANT FACTORS- INCLUDING THE TERMS OF SETTLEMENT DEED, THAT IT IS DE FACTO TERMINATION OF EMPLOYMENT, ON PAYMENT OF AGREED COMPENSATION, THIS OBSERVATION CANNOT BE PICKED UP IN ISOLATION AND TREATED AS ENTIRE ARRANGEMENTS. WHILE ON THIS SUBJECT, IT IS ALSO USEFUL TO TAKE NOTE OF HONBLE SUPREME COURTS JUDGMENT IN THE CAS E OF MAHENDRA SINGH DHANTWAL VS HINDUSTAN MOTORS LTD [(1985) 152 ITR 68 (SC)] WHERE IN COMPENSATION IN LIEU OF REINSTATEMENT WAS TREATED AS ELIGIBLE FOR RETRENCHM ENT COMPENSATION UNDER SECTION 10(10B). TO US, THE TAKEAWAY FROM THIS JUDGMENT SEEMS TO BE THAT IT IS NOT THE FORM BUT THE SUBSTANCE ITA NO. 1472/AHD/14 ASSESSMENT YEAR: 2008-09 PAGE 6 OF 6 THAT MATTERS SO FAR DEFINITION OF RETRENCHMENT COMP ENSATION IS CONCERNED. RIGHT NOW WE ARE DEALING WITH AN EMPLOYEE WHO IS GIVING UP HIS SOURC E OF LIVELIHOOD UNDER THE THREAT OF DISLOCATION, AND THE HYPER TECHNICAL INTERPRETATION S BASED ON TECHNICALITIES ABOUT THE WORDINGS IN THE SETTLEMENT DEED, SIGNED BY HIM UNDER THESE C OMPELLING CIRCUMSTANCES, IS BEING TAKEN AS THE UNDERSTANDING ABOUT ASSESSEES ACTUAL CONDUCT; THAT IS TOO PEDANTIC AN APPROACH AND IT CANNOT MEET OUR APPROVAL. LET US ALSO NOT FORGET TH AT WHILE TAKING CALLS ON THESE ISSUES, WHICH DEAL WITH EMPLOYEES IN THE LOWER RUNG OF HIERARCHY, WE MUST NOT BE TOO PEDANTIC OR HYPER TECHNICAL IN APPROACH. WE HAVE TO BE PRAGMATIC IN A PPROACH AND WE MUST GIVE FULL EFFECT TO THE TRUE INTENT OF THE PUBLIC WELFARE PROVISIONS. T O US, THE ARRANGEMENT IN QUESTION IS NOTHING BUT A TERMINATION OF EMPLOYMENT WITH THE OFFER OF C OMPENSATION. VIEWED THUS, THE PAYMENT IN QUESTION CANNOT BE ANYTHING BUT A RETRENCHMENT C OMPENSATION. 10. IN OUR CONSIDERED VIEW, THE CONDITIONS OF SECTI ON 10(10B), SO FAR AS ELIGIBILITY FOR EXEMPTION IS CONCERNED, IS SATISFIED. THAT, HOWEVER , IS NOT THE END OF THE MATTER. AS REGARDS THE AMOUNT ELIGIBLE FOR EXEMPTION UNDER SECTION 10( 10B), IT IS SPECIFICALLY PROVIDED IN THE AFORESAID SECTION THAT THE AMOUNT ELIGIBLE FOR EXEM PTION WILL BE THE LEAST OF (I) ACTUAL AMOUNT RECEIVED BY THE ASSESSEE; (II) THE AMOUNT SPECIFIED BY CENTRAL GOVERNMENT I.E. RS.5,00,000; AND (III) AN AMOUNT CALCULATED IN ACCORDANCE WITH T HE PROVISIONS OF CLAUSE (B) OF SECTION 25F OF THE INDUSTRIAL DISPUTES ACT, 1947 I.E. 15 DAYS AVERAGE PAY FOR EVERY COMPLETED YEARS OF SERVICES OR PART THEREOF IN EXCESS OF 6 MONTHS. ONE OF THE IMPORTANT RESTRICTIONS ON THE AMOUNT ELIGIBLE FOR EXEMPTION UNDER SECTION 10(10B) IS THAT IT SHOULD NOT EXCEED FIFTEEN DAYS AVERAGE PAY FOR EVERY COMPLETED YEARS OF SERVICES O R PART THEREOF IN EXCESS OF SIX MONTHS THIS ASPECT OF THE MATTER HAS NOT BEEN EXAMINED AT ALL. WE, THEREFORE, UPHOLD THE CLAIM IN PRINCIPLE BUT REMIT THE MATTER TO THE FILE OF THE AO FOR EXAM INATION OF THE QUANTIFICATION PART IN THE LIGHT OF THE ABOVE OBSERVATION. WITH THESE DIRECTIONS, TH E APPEAL IS ALLOWED IN PRINCIPLE BUT REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR L IMITED VERIFICATION AS ABOVE. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TER MS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 2 ND DAY OF JANUARY, 2018. SD/- SD/- S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBE R) AHMEDABAD, THE 2 ND DAY OF JANUARY, 2018 COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD