PRADEEP SADASHIV PANDHARE, MUMBAI V. ACIT CEN CIR 26(1), MUMBAI

ITA 6055/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79445 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANIL J SATHE
• Keywords: Revised return
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.6055/M/2013 ASSESSMENT YEAR: 2007-08 SHRI PRADEEP SADASHIV PANDHARE, A/304, ARUNODAYA APARTMENTS, YASHWANT NAGAR, SANTACRUZ (E), MUMBAI 400 055 PAN: AAKPP5328E VS. ACIT , CENTRAL CIRCLE-26(1), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL J. SATHE, A.R. REVENUE BY : SHRI DURGA DUTT, D.R. DATE OF HEARING : 16.06.2014 DATE OF PRONOUNCEMENT : 18.07.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF THE CIT(A) DATED 30.09.2013.THE ASSESSEE HAS TAK EN THE FOLLOWING GROUNDS OF APPEAL: 1.THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER BY IGNORING THE CLAU SE BY CLAUSE COMPLIANCE OF RULE 2BA SUBMITTED BY THE ASSESSEE. B EING ON MERITS OF THE COMPLIANCE OF SEC.10(10C) THE ORDER OF THE CIT( A) SHOULD BE QUASHED. 2.THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE EMPLOYER HAS DENIED THE BENEFIT U/S 10(10C) TO THE EMPLOYEE WHEN THE FACTS AND CLAUSES CONTRARY TO THIS ERE BROUGHT OUT TO THE NOTICE SHOWING A VERY CLEAR INTENTION OF THE EMPLOYER TO GRANT THE BENEFIT TO SEC. 10(10C) TO THE EMPLOYEES. THE ORDER OF THE CIT(A) S HOULD BE QUASHED. 3.THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN HOLDING THAT CLAUSE VI OF THE RULE 2BA IS VIOLATED BY THE EMPLOY ER BY PAYING EXCESS ITA NO. 6055/M/2013 SHRI PRADEEP SADASHIV PANDHARE 2 AMOUNTS THAN ALLOWED IGNORING THE ASSESSES CALCULAT IONS. THE ORDER OF THE CIT(A) SHOULD BE QUASHED. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED I N HOLDING THAT THE INTERPRETATION BROUGHT OUT OF THE CLAUSE VI BY THE ASSESSEE IS INCORRECT. IN THE CASES WHERE REVENUE IS INVOLVED THE INTERPRE TATION FAVOURABLE TO THE ASSESSEE SHOULD BE ACCEPTED AND THE ORDER OF TH E CIT(A) SHOULD BE QUASHED. 5. THE COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPRECIATE THE FACT THAT THE VRS SCHEME DRAFTED BY THE EMPLOYER HA S AMBIGUITY AND HENCE AS HELD IN THE CASE OF SAIL DSP OF THE CALCUT TA HIGH COURT THE SAME SHOLD BE READ IN FAVOUR OF THE ASSESSEE. THE O RDER OF THE CIT(A) SHOULD BE QUASHED. 6. THE COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPRECIATE THAT THE CASE IS SQUARELY COVERED THE DECISION OF BOMBAY HIGH COURT REPORTED IN 309 ITR 113 IN FAVOUR OF THE ASSESSEE. THE ORDER OF THE CIT(A) SHOULD BE QUASHED. 7. THE COMMISSIONER OF INCOME-TAX(APPEALS) FAILED T O APPRECIATE THAT THE CASE IS SQUARELY COVERED THE DECISION OF KOLKAT A TRIBUNAL SPECIAL BENCH IN THE CASE OF KRISHNA GOPAL SAHA (2009) 125 TTJ (KOL) (TM) (577). THE ORDER OF THE CIT(A) SHOULD BE QUASHED. 8. THE COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPRECIATE THAT THE CASE IS SQUARELY COVERED THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF MANASI KULKARNI ITA NO.8766/MUM/2011 ORDER DATED 11.9.2013 OF SEBI EMPLOYEES. THE ORDER OF THE CIT(A ) SHOULD BE QUASHED. 9. THE COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPRECIATE THAT THE CASE IS SQUARELY COVERED THE DECISION OF KOLKAT TA B BENCH ITA NO.1346 AND OTHERS OF 2011 IN THE CASE OF UTTARA GH OSH. THE ORDER OF THE CIT(A) SHOULD BE QUASHED. 10. YOUR APPELLATE CRAVES LEAVE TO ADD TO, ALTER, A MEND OR DELETE ANY OF THE FORGOING GROUND OF APPEAL. 2. THE BRIEF FACTS OF THE CA SE A R E T HE ASSESSEE WAS AN EMPLOYEE OF COLGATE PALMOLIVE INDIA LTD. AND TOOK VOLUNTARILY RETIREMEN T FOR WHICH HE WAS PAID COMPENSATION OF RS. 20,59 , 007/-. INITIALLY THIS COMPENSATION WAS OFFERED TO T AX BUT THE ASSESSEE FILED REVISED RETURN CLAIMING EXEM PTION OF RS.5 LAKHS U / S 10(10C). DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE COMPENSATION PAYABLE UNDER THE SCHEME OF THE EMPLOY ER DID NOT SATISF Y CONDITIONS OF RULE 2BA OF THE INCOME TAX RULES AND THE PA Y MENT W AS MORE THAN THE STIPULATED LIMITS AS PER CLAU S E-(VI) OF THE RULE 2BA . THE ASSESSEE WAS ITA NO. 6055/M/2013 SHRI PRADEEP SADASHIV PANDHARE 3 ASKED TO E X PLAIN BUT THE E X PLANATI O N OFFERED DID NOT FIND FAVOUR WITH THE ASSESSING OFFICER . T H E ASSESS IN G OFF I CE R C A LL E D F O R TH E IN FO RM A TI O N FR O M T H E E MPL OY ER OF THE ASSESSEE , W H O CA T EGO RI CA LL Y S T ATE D TH AT THE SC H E ME DID N OT FU L F IL TH E CO NDIT IO N S OF RUL E 2 B A I N C LUDIN G C L A U SE (V I ) OF T H E SA I D RUL E. THE EMPLOYER A L SO PROVIDED TH E CA L C UL AT I O N OF CO M PENSA TI ON PAID T O THE A SSESS EE. IT WAS MENTIONED THAT O N E O F C ONDITIONS UND E R SUB R U LE (V I )HAS BEEN THAT TH E AMOUNT R ECE I VE D UND E R VRS SHOULD NOT E XCE E D AMOUNT EQUIVALENT TO THR EE MONTHS SALARY FOR EACH C OMPL E TED Y EAR S OF SE R V ICE OR S ALAR Y A T TIME OF R E TIR E M E NT M UL T IPLI E D W ITH BAL A N CE N UM B ER OF MONTH S O F SERV I CE L EF T . THE TENUR E OF THE ASSESSEE WITH TH E COMPAN Y W AS FOR 21 .7 Y EARS AND HIS AGE AT TIME OF R E TIR E MENT W A S 46 . 95 YE A RS AND NUMBER OF Y EARS LEFT FOR RETIREMENT WAS 13 YEARS . HI S ELIGIBL E SALAR Y AT TIM E OF R E TIR E MENT W A S RS . 12 ,7 41 PER MONTH. ACCORD IN G L Y, AM O UNT S P EC I FIED UN D E R R U L E 2 B A WAS CALCULATED AS FOLLOWS: - THR EE MONTHS SALAR Y FOR E A C H CO MPL E T E D YE AR OF SE R V I CE COMES TO RS. 8, 30 , 605 ( R S . 1 2 , 7 41 X 21. 7 X3 ) - SA L ARY F O R TH E B AL ANCE M O NTH S OF SERV I CE WAS RS. 1 9,9 4 ,62 3 ( RS . 1 2 .7 4 1 X 1 2X 13 ) H OWEVE R , T HE AC T UA L AMOUN T P A ID TO ASSESSEE UND E R V R S W A S RS. 20, 5 9,007 W H ICH WAS H IG H E R T H AN E L IG IBL E AMOUNT ON A C C O UNT OF PA Y M E NT OF V RS COMP E N S ATIO N O N GROSS S A L ARY B Y TH E C OMP A N Y. 3. ACC ORDINGL Y, THE ASSESSING OFFICER HELD THAT SINCE THE SCHEME DI D NOT COMPL Y WITH TH E RULE 2BA E S PECIALL Y CLAUSE ( V I) , THE AS SES SEE WA S NOT ENT I TL E D T O EX EMP TIO N U / S 10(10 C ). ACCORDIN G L Y, THE SA ID EX EMPTI O N T O TH E E XTE N T OF R S .5 LA K H S WAS DI SA L LOWE D AN D A DD E D T O TH E T O T A L IN CO M E R E TURN E D . AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). ITA NO. 6055/M/2013 SHRI PRADEEP SADASHIV PANDHARE 4 4. THE LD. CIT(A) OBSERVED THAT THE C OMP E N SA T I ON P AYA BL E/ P A ID EXC E E D E D BOTH THE L I M I T S SET OUT IN CLAU S E ( VI) O F RUL E 2BA . THE CA LC UL A T I ON GIV EN B Y TH E ASSESSEE WAS ALSO ERRONEOUS . HE THEREFORE HELD TH A T THE A C TI O N O F TH E AS S ESSING OFFI C ER IN DISALLOWING D EDUCTION U / S 10 ( 10 C) T O TH E EX T E NT OF R S. 5 LAKH S WAS CORRECT AND ACCORDINGLY DISMISSED THE APPEAL OF THE ASSESSEE. THE ASSESSEE IS THUS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND HAVE ALSO GONE THROUGH THE RECORDS. THE LD. AR OF THE ASSESSEE HAS CONTENDED T H AT T H E C OMP A N Y H AD C L EA RL Y F RA M ED T H E V R S AS T AX C OMPL IANT A N D T HE WOR K MEN H AD ACCEPTED THAT THE V R S FRAMED WAS EXEMPT E D U / S 10 ( 10 C) O F T H E I NCOME TA X AC T . O NLY ON THIS U NDE R S TA NDING TH E WORKERS HAD RETI R ED F ROM THE COMPAN Y VO L UNTAR I L Y . THE LD. AR FURTHER REFERRED TO THE VARIOUS CLAUSE S OF THE SCHEME WHEREIN IT HAS BEEN MENTIONED THAT THE COMPENSATION PA Y ABL E UNDER THE S C HEME WAS EXEMPT ONL Y TO TH E EXTENT PERMISSIBLE UNDER SECTION 10 ( 10C ) OF THE INCOME TAX ACT 1961 R E AD WITH RULE 2BA OF THE INCOME TAX RULES , 1962 UP TO AN AMOUNT OF R S . 5 , 00 , 000 / -(RUPE E S FIVE LAKH S ONL Y). TH E TA X B E NEFIT REFERRED TO ABO V E WOULD BE AVAILABL E ONL Y TO AN ASSESSEE W HO H AS C OMPL E T E D 10 Y EARS OF S E R V ICE IN TH E COMPAN Y OR 40 Y EAR S OF AG E AND HAS NOT AVAILED OF BENEFIT OF SIMILAR VOLUNTARY RETIREMENT SCHEM E IN THE PAST. I T HAS BEEN A CONDI T ION O F THE S C H EME T HA T TH E VACA N CY CA U SED B Y VO L U NT A R Y R ET IR EMENT WOULD N O T B E F I LL E D U P N O R WOULD TH E R ET I R IN G ASSOCIATE B E E MPL OYE D IN A N O TH E R UNIT OR C ON CE RN B E L O NGIN G TO TH E C OMP A N Y . THE LD. AR HAS FURTHER SUBMITTED THAT A READING OF THE CLAUSES OF THE SCHEME REVEALS THAT T H E SC H E M E FRAMED WAS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 1 0( 10 C) OF TH E IN COME T AX ACT. ON THE OTHER HAND THE LD. DR HAS RELIED UPON THE DE CISIONS OF THE LOWER AUTHORITIES. ITA NO. 6055/M/2013 SHRI PRADEEP SADASHIV PANDHARE 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES. THE PROVISIONS OF THE SECTION 10(10C) ARE INTENDED T O E N C OUR AGE TH E VO LUNTA RY R E T I R E M E NT A N D PROVI D ES AN EXEMPTION FROM TAX UP TO THE AMOUNT OF RUPEES FIVE LAKHS T O EAC H E MPLO YEE R E T I R E D UNDER V R S. IT BE I NG B E N EFIC IAL PROVISION HENCE REQUIRES LIBERAL INTERPRETATION. KOLKATA TRIBUNAL (THIRD MEMBER DECISION) IN THE CAS E OF KRISHNA GOPAL SAHA (2009) 125 TTJ (KOL) (FM) (577) WHILE RELYING UPON THE DECISIONS OF THE HIGH COURTS OF BOMBAY IN THE CASE OF CIT VS NAGESH DEVIDASS KULKARNI (2007) 210 CTR(BOM.) 471, HONBLE KOLKATA HIGH COURT IN THE CASE OF SAIL DSP VR EMPLOYEES ASSOCIATION VS . UNION OF INDIA (2003) 181 CTR (CAL) 367 AND OF HONBLE KARNATKA HIGH COU RT IN THE CASE OF CIT VS. P. SURENDRA PRABHU(2005) 198 CTR (KAR)209 HAS HELD THAT THE PROVISIONS OF SECTION 10(10C) BEING BENEFICIAL PROVISIONS ARE TO BE INTERPRETED LIBERALLY. THE ASSESSEE IS ENTITLED TO EXEMPTION U / S 10(10C) TO THE EXTENT OF RS. 5 LAKHS, EVEN IF THE AMOUNT RECEIVED EXCEEDS THE LIMI TS AS PRESCRIBED BY RULE 2 BA OF THE INCOME TAX RULES. FURTHER, THE HONBLE JURISDICTIONAL HIGH COURT OF BOMBAY, IN THE CASE OF CIT VS. KOODATHIL KALLYATAN AMBUJAKSHAN (2008) 219 CTR (BOM) 80, HAS HELD THAT THE GUIDELINES/RULE 2BA IS PROCEDURAL IN NATURE AND IS TO BE READ IN HARMONIOUS CONSTRUCTION WITH THE SUBSTANTIVE PROVISIONS OF THE ACT. THE HONBLE KOLKATA HIGH CO URT IN THE CASE OF SALE DSPVR EMPLOYEES OF THE ASSOCIATION (SUPRA) HAS HEL D THAT SECTION 10(10C) WAS INSERTED IN ORDER TO MAKE VOLUNTARY RETIREMENT ATTRACTIVE SO AS TO REDUCE HUMAN COMPLIMENTS FOR SECURING ECONOMIC VIABILITY O F CERTAIN COMPANIES. THIS HAS TO BE INTERPRETED IN A MANNER BENEFICIAL T O THE OPTED FOR RETIREMENT, EVEN IF THERE IS ANY AMBIGUITY. 7. WE MAY OBSERVE THAT THE SECTION 10(10C) STARTS W ITH THE WORDS ANY AMOUNT RECEIVED OR RECEIVABLE BY AN EMPLOYEE WHERE AS THE RULE 2BA CLAUSE 6 HAS PRESCRIBED AS LIMIT OF SUCH AMOUNT. IT HAS BEE N PROVIDED IN FIRST PROVISO TO ITA NO. 6055/M/2013 SHRI PRADEEP SADASHIV PANDHARE 6 SECTION 10(10C) THAT THE SCHEMES UNDER THIS SECTION ARE TO BE FRAMED BY THE VARIOUS INSTITUTES/COMPANIES IN ACCORDANCE WITH SUC H GUIDELINES AS MAY BE PRESCRIBED. A CAREFUL PERUSAL OF THE PROVISIONS OF SECTION 10(10C) WHEN READ WITH RULE 2BA OF THE INCOME TAX RULES SHOWS THAT TH E SUBSTANTIVE PROVISIONS OF THE ACT DO NOT PRESCRIBE ANY LIMIT RELATING TO T HE AMOUNT RECEIVED OR RECEIVABLE BY AN EMPLOYEE ON HIS VOLUNTARY RETIREME NT FOR EXEMPTION UP TO RS. 5 LAKHS UNDER THE SCHEME WHICH IS TO BE FRAMED AS PER GUIDELINES AS PROVIDED UNDER RULE 2BA. IT IS EVIDENT BEFORE US THAT THE VRS SCHEME IN CONSIDERATION AND ITS VARIOUS CLAUSES WERE INCONFORMITY WITH THE PROVISIONS OF SECTION 10(10C), EXCEPT THAT THE ASSESSEE IN THIS CASE HAD RECEIVED AMOUNT ON HIS VOLUNTARY RETIREMENT MORE THAN THE LIMIT PRESCRIBED UNDER RULE 2BA. AS PER SECTION 10(10C), THE SCHEME IS TO BE FRAMED AS PER THE GUIDELINES AS MAY BE PRESCRIBED. FURTHER A PERUSAL OF THE HEADING OF RUL E 2BA SHOWS THAT IT PRESCRIBES THE GUIDELINES FOR THE PURPOSE OF SECTIO N 10(10C). THE GUIDELINES, AS ITS NOMENCLATURE SUGGESTS, ARE JUST FOR THE PURPOSE OF GUIDANCE, WHILE FRAMING THE SCHEME OF VOLUNTARY RETIREMENT BY THE INSTITUTE S/COMPANIES AND CANNOT BE SAID TO BE MANDATORY IN NATURE BUT ONLY PROCEDURAL OR GUIDING IN NATURE. IF THE SCHEME AS A WHOLE, OTHERWISE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 10(10C) AND AS PER THE GUIDELINES UNDER RULE 2BA EX CEPT AS TO SOME DEPARTURES FROM THE GUIDELINES, BUT NOT IN VIOLATIO N OF THE GUIDELINES AS A WHOLE OR OF THE PROVISIONS OF SECTION 10(10C), ITS OBJECT AND PURPOSES, THEN, IN SUCH AN EVENT, MERELY BECAUSE THE SCHEME DIFFERS AT ONE OR TWO POINTS FROM THE GUIDELINES IS NOT SUFFICIENT TO DENY THE BENEFITS G RANTED UNDER THE SECTION 10(10C) TO AN EMPLOYEE IN VIEW OF THE BENEFICIAL NA TURE OF THE PROVISION KEEPING IN VIEW THE PURPOSE AND OBJECT SOUGHT TO BE ACHIEVED THROUGH SUCH A PROVISION. WE, THEREFORE, ARE OF THE VIEW THAT DEN IAL OF EXEMPTION TO THE ASSESSEE ONLY BECAUSE HE HAS RECEIVED COMPENSATION ON HIS RETIREMENT A LITTLE MORE THAN THE LIMIT PRESCRIBED BY RULE 2BA, WILL BE AGAINST THE SPIRIT OF THE ITA NO. 6055/M/2013 SHRI PRADEEP SADASHIV PANDHARE 7 PROVISIONS OF THE SECTION 10(10C), ESPECIALLY, WHEN NO SUCH LIMIT HAS BEEN PRESCRIBED UNDER SECTION 10(10C) AND ALSO IN VIEW O F OUR OBSERVATIONS THAT PROVISIONS OF RULE 2BA ARE NOT MANDATORY BUT IN THE SHAPE OF GUIDELINES WHICH ARE TO BE TAKEN INTO CONSIDERATION WHILE FRAMING TH E SCHEME. 8. IN VIEW OF OUR DISCUSSION ABOVE, THE APPEAL OF T HE ASSESSEE IS ALLOWED AND IT IS HELD THAT THE ASSESSEE IS ENTITLED TO EXE MPT UNDER SECTION 10(10C) UP TO THE AMOUNT OF RS.5,00,000/- AS PROVIDED UNDER THE S AID SECTION. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.07.2014. SD/- SD/- (B.R. BASKARAN) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 18.07.2014. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO. 6055/M/2013 SHRI PRADEEP SADASHIV PANDHARE 8 DATE INITIAL WHETHER DICTATION PAD ENCLOSED WITH THE FILE : YES/NO (AS THE ORDER HAS BEEN TYPED WITH THE HEL P OF MANUSCRIPT) 1. DRAFT DICTATED ON 10.07.14 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 11.07.14 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. DATE OF PRONOUNCEMENT SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER