UMESH CH.BEHERA V. DY.COMMNR,INCOME TAX

WP(C)/8074/2009

AI Insights

The case revolves around the challenge to the orders passed by the Assessing Officer and the Revisional Authority, which denied the petitioner, Umesh Chandra Behera, an exemption under Section 10(10C) of the Income Tax Act. This exemption was claimed on the amount received under a Voluntary Retirement Scheme (VRS) from the State Bank of India. The Assessing Officer and the Revisional Authority had rejected the claim based on the specific provisions of the Exit Option Scheme, which stated that the scheme did not comply with Rule 10(10C) of the Income Tax Act and no benefit of exemption was intended. However, the High Court, referencing decisions from other High Courts, found that the conditions of Rule 2BA had been met and that the exemption should be granted.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 748729 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 20-02-2019
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax & another \/ Appasaheb Baburao Kamble, COMMISSIONER OF INCOME TAX VS. KOODATHILKALLYATAN AMBUJAKSHAN
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessing Officer; Income tax exemption; Revisional Authority; Voluntary Retirement Scheme; VRS Scheme
• Section: 10(14); 10(10C); 2BA

Judgement Text

"07. 20.02.2019 Heard learned counsel for the parties. By way of this writ petition, the petitioner has challenged the order dated 03.03.2009 passed by the revisional authority whereby the revisional authority has dismissed the revisional application and confirmed the order of the Assessing Officer. Learned counsel for the petitioner contended that the Assessing Officer has observed at Paragraphs-4 and 4.1 reads as under: “4. In response to Departmental notices, Sri Umesh Chandra Behera, assessee himself, appeared on 28.03.07 and submitted that the exemption of Rs.5 lacs has been claimed out of the amount received on VRS Scheme under the provisions of Sec.10(10C) but in the statement of income, it was wrongly mentioned as U/s.10(14). 4.1. During the course of hearing, copy of the Circular issued for Exit Option Scheme issued by the State Bank of India was obtained. As per Clause-10 of the above said Circular, no benefit of exemption U/s.10(10C) of the I.T. Act is allowed on ex gratia paid to the employees on Exit Option Scheme. The relevant portion of Clause-10 of Exit Option Scheme is reproduced below for better appreciation. “10. INCOME TAX-TDS As the proposed scheme does not comply with rule 10(10C) of Income Tax Act, 1961 and no benefit of exemptions of ex-gratia from income tax is intended in this scheme, there is no legal requirement for obtaining prior approval of Income Tax Department.” Thus, it is clearly mentioned in Clause-10 of the Exit Option Scheme that no benefit of exemption U/s.10(10C) on ex-gratia paid to the employee exit from service under this Scheme is allowed. Hence, the exemption claimed by the assessee U/s.10(10C) is disallowed and added back…………………..” W.P.(C) No.8074 of 2009 2 The revisional authority while considering the same has rejected the claim of the petitioner by observing at paragraphs-4, 5, 6, 7 and 8 as follows: “4. As regards to the exemption U/s.10(10C) is concerned, Clause-10 of the Exit Option Scheme, as approved by the bank authorities, unequivocally speaks that the scheme does not comply with the Rule 10(10C) of the Income Tax Act and no benefit of exemption of ex-gratia from income tax is intended in this scheme. However, during this proceeding assessee vehemently opposed this clause and submitted that the requirements as per Rule 2BA, read with Section 10(10C) have been fulfilled by the assessee and he is eligible for such exemption. 5. Now, coming to the Rule 2BA which stipulates that guideline for the purpose of Section 10(10C), it is seen that there are in total six requirements which a voluntary separation scheme framed by a public sector company must adhere to for getting benefit of that section. The requirements inter-alia includes the following:- (i) The scheme has been drawn to result in overall reduction in existing strength of the employees. (ii) The vacancy caused by the voluntary retirement is not to be filled up. (iii) The retiring employee of a company shall not be employed in another company or concern belonging to the same management. 6. During the course of present proceedings, the above three requirements were sought to be test checked with the case of the assessee. First coming to the requirement that the scheme should result in overall reduction of the existing strength, the assessee contended that after impleation of the scheme the permanent staff strength of the bank has reduced. On the basis of information provided by the headquarters of the bank, assessee submitted the following particulars regarding the staff strength. 3 As on 31.3.2006 - 1,98,774 As on 31.3.2007 - 1,85,388 As on 31.9.2007 - 1,79,188 However, from the records it is noted that the above scheme was introduced on 29.4.2005 and withdrawn on 01.11.2006. The comparison given by the assessee in support of his claim loses its relevance. Reduction in the staff strength after the scheme was withdrawn does not go to prove that the Exit Option Scheme resulted in overall reduction of existing strength of the employees. 7. Now, coming to the requirement, it is stipulated that the vacancy caused by voluntary retirement is not to be filled up. On this point assessee contended that since each year over all employee position is reduced, question of filling up of vacancy does not arise. The contention of the assessee is farfetched and does not address to the issue involved. Just because over all employee strength is reduced it does not mean that vacancy on voluntary separation is not to be filled up, more so, when there is no provision in the scheme making it mandatory upon the bank not to fill up the vacancies. In other words bank would always be fee to fill up the vacancies caused by the voluntary retirement/separation as and when the need arises. 8. Similarly, it is stipulated in Rule 2BA that the retiring employee of a company shall not be employed in another company or concern belonging to the same management. The assessee contended that after retirement he has not been employed in any company or concern belonging to the same management. This self declaration of the assessee does not preclude him from seeking further employment in any concern belonging to the bank management. As no provision is there in the Exit Option Scheme to prevent a retiring employee from reemployment in any concern managed by employer organization, only a self declaration by the assessee cannot be construed as a sufficient compliance to this requirement as stipulated in Rule 2BA of the I.T Rules.” 4 Learned counsel for the opposite parties supported both the orders of the Assessing Officer and Revisional Authority. However, now issue is considered by learned Single Judge of Madras High Court relying upon the decision of Division Bench of Karnataka High Court in the case of Commissioner of Income Tax & another –v- Appasaheb Baburao Kamble, (2015) 370 ITR 499 (Kar) wherein it has been observed at paragraphs-4 and 5 as follows: “4. So far as the first question of law is concerned, the Income Tax Appellate Tribunal on facts has concluded that the respondent/assessee has served for a period of more than 10 years and at the time of retirement he was more than 40 years. Second ‘Exit Option’ Scheme of the State Bank of India was introduced to reduce the staff. It was just impossible to continue new environment of computerization applied to the workers and officers. The scheme has resulted in overall reduction of the employees. The assessee has furnished the declaration that he has not accepted any commercial employment in any company or concern belonging to the same management. Thus on facts, the first Appellate Authority has concluded that all the conditions laid down in Rule 2BA of the Income Tax Rules are fulfilled. Hence, virtually the first question of lawas raised by the Department is answered by the first Appellate Authority. Such order of the first Appellate Authority is confirmed by the Income Tax Appellate Tribunal. In addition to the same, any provision giving benefit to the assessee generally will be interpreted in favour of the assessee generally. 5. In respect of the second question of law, as raised by the Department, is no more resintegra in view of the judgment of the Bombay High Court in the case of COMMISSIONER OF INCOME TAX VS. KOODATHILKALLYATAN AMBUJAKSHAN (2008) 219 CTR (Bom) 80: (2008) 12 DTR (Bom) 138: (2009) 309 ITR 113. In the said judgment, the Bombay High Court has ruled that CBDT clarification based on RBI’s letter stating that the receipts under Voluntary Retirement Scheme did not qualify for exemption under Section 10 (10C) of 5 Income Tax Act is not binding on the Courts. The said judgment is holding the field for more than five years and the same is being followed by other courts. In view of the same, the second question of law does not arise for consideration. In view of the same, no interference is called for. Appeal fails and the same stands dismissed.” In our considered opinion, the issue is also covered under the definition of Section 10(10C) of the Income Tax Act which is reproduced herein below: “(10C) any amount received or receivable by an employee of- (i) a public sector company; or (ii) any other company; or (iii) an authority established under a Central, State or Provincial Act; or (iv) a local authority; or] (v) a co- operative society,- or (vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956 ); or (vii) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961) ; or (vii-a) any State Government; or (vii-b) the Central Government; or (vii-c) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette, specify in this behalf; or (viii) such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf, on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees: Provided that the schemes of the said companies or authorities or societies or Universities or the Institutes referred to in sub-clauses (vii) and 6 (viii)], as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be prescribed. Provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year ; Provided also that where any relief has been allowed to an assessee under Section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or terminatioin of service or voluntary separation, no exemption under this clause shall be allowed to him in relation to such, or any other, assessment year; Thus, the issue is covered. The petitioner was working in the State of Bank of India which is Nationalized Bank and has obtained the benefit pursuant to the VRS. Hence, this writ petition deserves to be allowed and the same is allowed. The orders passed by the Revisional Authority as well as Assessing Officer refusing exemption under Section 10(10C) of the Income Tax Act are set aside. The petitioner shall be granted benefit of Section 10(10C) of the Income Tax Act for exemption and if any tax is collected, the same shall be refunded to him. Accordingly, the writ petition stands disposed of. Urgent certified copy of this order be granted on proper application. ……..………………… K.S. JHAVERI (CHIEF JUSTICE) ……..…………………… K.R. MOHAPATRA (JUDGE) bks/jm 7 "