Smt. Kunjmole Mathew, Baroda V. The Income Tax Officer, Ward-8(3), Baroda

ITA 1473/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6002 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Keywords: Reopening of assessment
• Section: 10

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER , .., ./ ITA NO. 1473/AHD/2014 / ASSESSMENT YEAR: 2008-09 SMT. KUNJMOLE MATHEW, 36, RADHA NAGAR, B/H SWATI SOCIETY, NEW SAMA ROAD, VADODARA PAN : AEVPK 2983 H VS. INCOME-TAX OFFICER, WARD-8(3), BARODA / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI PARIN SHAH, AR REVENUE BY : SHRI ALBINUS TIRKEY, SR DR ' / DATE OF HEARING : 21/02/2018 ( * / DATE OF PRONOUNCEMENT : 01/03/2018 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF THE LD. CIT(A)-VI, BARODA DATED 03.02.2014 PASSED FOR ASSES SMENT YEAR 2008-09. 2. THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL. IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE REOPENING OF ASSESSMENT BY ISSUANCE OF NOTICE UNDER SECTION 147/148 OF THE ACT. THE LEARNED COUN SEL FOR THE ASSESSEE HAS NOT PRESSED THIS GROUND OF APPEAL; HENCE, IT IS REJECTE D. 3. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED INIT IATION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. TO OUR MIND, IT IS P REMATURE AT THIS STAGE; HENCE, NOT MAINTAINABLE. THEREFORE, THE SAME IS ALSO REJE CTED. 4. IN GROUND NO.4, THE ASSESSEE HAS PLEADED THAT IN TEREST UNDER SECTION 234A/B/C WAS NOT LEVIABLE UPON HER; HOWEVER, LEARNE D COUNSEL FOR THE ASSESSEE ADMITTED THAT IT IS CONSEQUENTIAL IN NATUR E. ITA NO. 1473/AHD/2014 SMT. KUNJMOLE MATHEW VS. ITO AY : 2008-09 - 2 5. THUS, WE ARE LEFT WITH GROUND NO.2, IN WHICH THE ASSESSEE HAS PLEADED THAT LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DIS ALLOWANCE OF EXEMPTION CLAIMED UNDER SECTION 10(10B) OF THE ACT AMOUNTING TO RS.5,00,000/-. 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WAS WORKING AS STENOGRAPHER AT BARODA WITH ACNIELSEN ORG MARG PVT. LTD. SHE WAS ORDERED TO BE TRANSFERRED TO MUMBAI. SHE DISPUTED THE TRAN SFER ORDER BEFORE THE INDUSTRIAL TRIBUNAL, BARODA. THE TRIBUNAL QUASHED A ND SET ASIDE THE TRANSFER ORDER AND DIRECTED THE EMPLOYER COMPANY TO PAY TO T HE EMPLOYEE AN AMOUNT OF RS.5,000/- BY WAY OF COST. THE EMPLOYEE CHALLENGE D THE ABOVE AWARD BEFORE THE HONBLE HIGH COURT OF GUJARAT. DURING THE PEND ENCY OF THE MATTER BEFORE THE HONBLE COURT, BOTH THE PARTIES ARRIVED AT SETT LEMENT OUTSIDE THE COURT AND AGREED TO WITHDRAW THE CASE PENDING BEFORE THE COUR T. THE EMPLOYER COMPANY PAID AN AMOUNT OF RS.5,50,000/- TO THE EMPLOYEE AND SHE APPLIED FOR RESIGNATION. ULTIMATELY, SHE WAS RELIEVED FROM THE DUTIES. ACCORDING TO THE ASSESSEE, IT WAS A COMPENSATION ON RETRENCHMENT FRO M THE JOB; WHEREAS ACCORDING TO THE ASSESSING OFFICER, IT WAS AN EX-GR ATIA PAYMENT. 7. THE ASSESSEE HAD FILED HER RETURN OF INCOME ON 2 5.07.2008 DECLARING TOTAL INCOME OF RS.71,048/- FOR THE YEAR UNDER CONSIDERAT ION. SHE CLAIMED EXEMPTION OF RS.5,00,000/- UNDER SECTION 10(10B) OF THE ACT W HICH WAS DISALLOWED BY THE ASSESSING OFFICER. 8. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIE F TO THE ASSESSEE. 9. LEARNED COUNSEL FOR THE ASSESSEE, AT THE VERY OU TSET, SUBMITTED THAT SHRI VISHNU MOHAN T. NAIR WAS SIMILARLY SITUATED EMPLOYE E WITH THIS COMPANY WHO HAS ALSO RECEIVED IDENTICAL COMPENSATION. THE DISP UTE WITH REGARD TO THAT ASSESSEE TRAVELLED UPTO THE TRIBUNAL AND THE TRIBUN AL HELD THAT THE ASSESSEE IS ENTITLED FOR THE BENEFIT UNDER SECTION 10(10B) OF T HE ACT. HE PLACED ON RECORD COPY OF THE TRIBUNALS ORDER PASSED IN ITA NO.1472/ AHD/2014. ITA NO. 1473/AHD/2014 SMT. KUNJMOLE MATHEW VS. ITO AY : 2008-09 - 3 10. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTH ER HAND, WAS UNABLE TO CONTROVERT THIS CONTENTION OF THE LEARNED COUNSEL F OR THE ASSESSEE. HE RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 11. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT THE TRIBUNAL HAS CO NSIDERED AN IDENTICAL ISSUE IN THE CASE OF VISHNU MOHAN T. NAIR VS. ITO (ITA NO.14 72/AHD/2014), WHEREIN THE ASSESSEE WAS ALSO WORKING WITH ACNIELSEN ORG MA RG PVT. LTD. AND HE WAS TRANSFERRED FROM BARODA TO MUMBAI VIDE ORDER DATED 21.07.2003. HE WENT TO THE INDUSTRIAL TRIBUNAL AND THE DISPUTE ULTIMATELY TRAVELLED UPTO THE HONBLE GUJARAT HIGH COURT AND AS PER THE SETTLEMENT BETWEE N THE ASSESSEE AND EMPLOYER, A SUM OF RS.6,50,000/- WAS PAID TO THE EM PLOYEE. HE APPLIED FOR RESIGNATION AND THAT RESIGNATION WAS ACCEPTED. IN THIS BACKGROUND, THE TRIBUNAL RECORDED THE FOLLOWING FINDINGS:- 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 T HE APPLICABLE 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 ELIG IBLE FOR EXEMPTION UNDER SECTION 10(10B). AS WE EXPLORE THIS ASPECT OF THE M ATTER, WE FIND THAT SECTION 10 (10B) OF THE INCOME TAX ACT 1961 DEFINES THE AMOUNT ELIGIBLE FOR EXEMPTION UNDER THIS PROVISIONS AS ANY COMPENSATION RECEIVED BY A WORKMAN UNDER THE INDUSTRIAL DISPUTES ACT, 1947 (14 OF 1947), OR UNDE R ANY OTHER ACT OR RULES, ORDERS OR NOTIFICATIONS ISSUED THEREUNDER OR UNDER ANY STANDING ORDERS OR UNDER ANY AWARD, CONTRACT OF SERVICE OR OTHERWISE, AT THE TIME OF HIS RETRENCHMENT. CLEARLY, THEREFORE, AN ELIGIBLE AMOUNT HAS TO BE 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 AMO UNT BEING IN THE NATURE OF COMPENSATION UNDER THE INDUSTRIAL DISPUTES ACT, IT IS EVIDENT FROM A PLAIN 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 O F 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 ADM ITTEDLY UNDER THE INDUSTRIAL DISPUTES ACT 1947, AND ONCE IT IS HE LD THAT THE SAID ORDER STANDS MODIFIED SO AS TO TAKE INTO ACCOUNT THE PAYMENT OF, INTER ALIA, PAYMENT OF RS 6,50,000 BY THE EMPLOYER, THE SAID PAYMENT CANNOT B UT BE TREATED AS A COMPENSATION UNDER THE INDUSTRIAL DISPUTES ACT, 194 7. THE FIRST LIMB OF SECTION ITA NO. 1473/AHD/2014 SMT. KUNJMOLE MATHEW VS. ITO AY : 2008-09 - 4 10(10B) IS THUS SATISFIED. THE NEXT QUESTION THEN I S WHETHER THE SAID COMPENSATION CAN BE SAID TO HAVE BEEN PAID AT THE T IME OF RETRENCHMENT. IN ORDER TO FIND ANSWER TO THIS QUESTION, WE WILL HAVE TO TA KE A LOOK AT THE DEFINITION OF EXPRESSION RETRENCHMENT UNDER SECTION 2(OO) OF TH E 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 AS A PUNISHMENT INFLICTED BY WAY OF DISCIPLINARY ACTION BUT DOES NO T 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 E MPLOYER AND THE WORKMAN CONCERNED ON ITS EXPIRY OR OF SUCH CONTRACT BEING TERMINATED UNDER A STIPULATION ON THAT BEHALF CONTAINED THEREI N; 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 A ND (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 C OVERED BY THESE TWO CLAUSES. AS A MATTER OF FACT, CASE OF THE REVENUE IS THAT THERE IS NO TERMINATION AT ALL AS IT IS A RESIGNATION BY THE EMPLOYEE WHICH HAS BEEN ACCEPTED BY THE EMPLOYER AND THE RELIANCE IS PLACED ON THE DOCUMENTATION IN SETTLEME NT DOCUMENTS. SUCH A PLEA IS ONLY FIT TO BE NOTED AND REJECTED. HERE IS A SETTLE MENT AND FOR A CONSIDERATION THAT THE ASSESSEE HAS QUIT EMPLOYMENT, AND THE ASSESSEE S LEAVING THE EMPLOYMENT IS DEPENDENT UPON THE PAYMENT BEING MADE BY THE EMPLOY ER. 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 ARRANGEMENTS APART, SUCH AN ARRANGEMENT IS DE FACTO AS ALSO IN T HE EYES OF LAW AN ARRANGEMENT FOR TERMINATION OF EMPLOYMENT ON PAYMENT OF COMPENS ATION. LETS RECAPITULATE THE BASIC FACTS OF THIS CASE AGAIN. HERE IS A VADOD ARA BASED EMPLOYEE WHO IS TRANSFERRED TO MUMBAI AND THE EMPLOYEE CONSIDERS SU CH 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 BE FORE THE TRIBUNAL. THE MATTER DOES NOT END THERE. HIS EMPLOYER, OBVIOUSLY WITH MU CH BETTER RESOURCES AT HIS DISPOSAL, CARRIES THE MATTER BEFORE HONBLE HIGH CO URT. THE LITIGATION DRAGS ON AT AHMEDABAD NOW AND WITH THE KIND OF RESOURCES THAT H IS EMPLOYER HAS HIS COMMANDS AND THERE IS EVERY POSSIBILITY THAT IT WIL L GO ON FOR LONG TIME. DAMOCLES SWORD STILL HANGS ON HIS HEAD AND FOUR YEA RS HAVE PASSED ON SINCE HE ITA NO. 1473/AHD/2014 SMT. KUNJMOLE MATHEW VS. ITO AY : 2008-09 - 5 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 ASSESSEE IS READY TO LEAVE THE EMPLOYMENT, IN ADDITION TO ALL HIS NORMAL TERMINAL DUES, HE GETS RS 6,50,000 AS EX GRATIA COMPENSATION. IN SIMPLE WORDS, IT IS AN O FFER FOR TERMINATION OF HIS EMPLOYMENT BY THE EMPLOYER WITH AN ADDITIONAL PAYME NT OF RS 6,50,0000. IN OUR HUMBLE UNDERSTANDING, THIS IS NOTHING BUT AN OFFER OF TERMINATION OF EMPLOYMENT WITH AN EX GRATIA PAYMENT 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 ARRANGEME NT IS A RESIGNATION BY THE EMPLOYEE. AS FOR THE EMPHASIS PLACED ON THE CLAUSE, IN THE SETTLEMENT DEED, TO THE EFFECT THAT THE RESPONDENT SHALL, UPON RECEIVING T HE 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 RESI GNED FROM VADODARA OR MUMBAI, AS WE HAVE SAID BEFORE, NOTHING REALLY TUR NS 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 COM E 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 P AYMENT OF AGREED COMPENSATION, THIS OBSERVATION CANNOT BE PICKED UP IN ISOLATION AND TREATED AS ENTIRE ARRANGEMENTS. WHILE ON THIS SUBJECT, IT IS A LSO USEFUL TO TAKE NOTE OF HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF MAH ENDRA SINGH DHANTWAL VS HINDUSTAN MOTORS LTD [(1985) 152 ITR 68 (SC)] WHERE IN COMPENSATION IN LIEU OF REINSTATEMENT WAS TREATED AS ELIGIBLE FOR RETREN CHMENT COMPENSATION UNDER SECTION 10(10B). TO US, THE TAKEAWAY FROM THIS JUDG MENT SEEMS TO BE THAT IT IS NOT THE FORM BUT THE SUBSTANCE THAT MATTERS SO FAR DEFINITION OF RETRENCHMENT COMPENSATION IS CONCERNED. RIGHT NOW WE ARE DEALING WITH AN EMPLOYEE WHO IS GIVING UP HIS SOURCE OF LIVELIHOOD UNDER THE THREAT OF DISLOCATION, AND THE HYPER TECHNICAL INTERPRETATIONS BASED ON TECHNICALITIES A BOUT THE WORDINGS IN THE SETTLEMENT DEED, SIGNED BY HIM UNDER THESE COMPELLI NG 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 THAT WHILE TAKING CALLS ON THESE ISSUES, WHICH DEAL WITH EMPLO YEES IN THE LOWER RUNG OF HIERARCHY, WE MUST NOT BE TOO PEDANTIC OR HYPER TEC HNICAL IN APPROACH. WE HAVE TO BE PRAGMATIC IN APPROACH AND WE MUST GIVE FULL E FFECT TO THE TRUE INTENT OF THE PUBLIC WELFARE PROVISIONS. TO US, THE ARRANGEMENT I N QUESTION IS NOTHING BUT A TERMINATION OF EMPLOYMENT WITH THE OFFER OF COMPENS ATION. VIEWED THUS, THE PAYMENT IN QUESTION CANNOT BE ANYTHING BUT A RETREN CHMENT COMPENSATION. 10. IN OUR CONSIDERED VIEW, THE CONDITIONS OF SECTI ON 10(10B), SO FAR AS ELIGIBILITY FOR EXEMPTION IS CONCERNED, IS SATISFIE D. 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 AFORESA ID SECTION THAT THE AMOUNT ELIGIBLE FOR EXEMPTION WILL BE THE LEAST OF (I) ACT UAL AMOUNT RECEIVED BY THE ASSESSEE; (II) THE AMOUNT SPECIFIED BY CENTRAL GOVE RNMENT I.E. RS.5,00,000; AND (III) AN AMOUNT CALCULATED IN ACCORDANCE WITH THE P ROVISIONS OF CLAUSE (B) OF SECTION 25F OF THE INDUSTRIAL DISPUTES ACT, 1947 I. E. 15 DAYS AVERAGE PAY FOR ITA NO. 1473/AHD/2014 SMT. KUNJMOLE MATHEW VS. ITO AY : 2008-09 - 6 EVERY COMPLETED YEARS OF SERVICES OR PART THEREOF I N EXCESS OF 6 MONTHS. ONE OF THE IMPORTANT RESTRICTIONS ON THE AMOUNT ELIGIBLE FOR E XEMPTION UNDER SECTION 10(10B) IS THAT IT SHOULD NOT EXCEED FIFTEEN DAYS AVERAGE PAY FOR EVERY COMPLETED YEARS OF SERVICES OR 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 EXAMINAT ION OF THE QUANTIFICATION PART IN THE LIGHT OF THE ABOVE OBSERVATION. WITH THESE D IRECTIONS, THE APPEAL IS ALLOWED IN PRINCIPLE BUT REMITTED TO THE FILE OF THE ASSESS ING OFFICER FOR LIMITED VERIFICATION AS ABOVE. 12. THERE IS NO DISPARITY ON FACTS; THEREFORE, RESP ECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA), WE SET ASIDE THE ORDER OF THE REVENUE AUTHORITIES AND REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFIC ER FOR LIMITED VERIFICATION IN TERMS OF THE ORDER OF THE TRIBUNAL IN THE CASE OF V ISHNU MOHAN T. NAIR AS CONTAINED IN PARAGRAPH NO.10 (SUPRA). THUS, THE AP PEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 1 ST MARCH, 2018 AT AHMEDABAD. SD/- SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER (RAJPAL YA DAV) JUDICIAL MEMBER AHMEDABAD; DATED, 01/03/2018 BIJU T., SR.PS ' '() *)/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , / CONCERNED CIT 4. , ) ( / THE CIT(A)- 5. ) '' , , /DR,ITAT, AHMEDABAD, 6. 6 / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) ITAT, AHMEDABAD