TMI Blog2014 (8) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... oard 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 requirements of Rule 2BA of I.T.Rules, 1962 have been met ignoring the e-circular of the SBI, as well as the Board s Instruction 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 ₹ 4,43,040/-. The assessee was employed with State Bank of India, and has taken voluntary ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief 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 the nature of salary or receives payment which is a profit 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 lieu 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 voluntary 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 of 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the benefits under section 89 in addition to the benefits available under section 10(10C). iii. Subsequent to the decision of the Hon ble High Court supra, the Board has issued Circular F.No.173(1)/32/2009-ITA-1 dated 08.05.2009, the content of the said circular 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 Reserve 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 Hon ble High Court of Bombay vide its order dated 4th July 2008 in the case of Commissioner of Income tax Vs. KodathiI 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 under were for exemption u/s. 10(10C). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants 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 Court 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 ITR 638 (Cal) - In this case it has been held that- Section 10(10C) of the Act, 1961, uses 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 and 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 construction. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pto the extent of ₹ 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 also 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 Prabhu (2005) 279 ITR 402 (Kar)- In this case the Hon ble Kamataka High Court has held that S.10(l0C) 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 any 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(10C) more than once. The proviso makes it clear that once an employee has taken the benefit of exemption from tax provided u/s. 10(10C), he will not be allowed to cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt by the assessee and Revenue: Held, (i) that the assessee, employee of the respondent-bank was not only entitled to the benefit of exemption u/s. 10(10C) 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 assessee 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 towards 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 Hon ble 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 ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this context, it is relevant to mention the observation of the Hon ble 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 the 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 appellant is entitled exemption u/s. 10(10C) of the Act. The Assessing Officer is therefore, directed to allow exemption to the extent of ₹ 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. Moreover both circulars are not binding to the Tribunal. We find that the CIT(A) has relied upon the decision of Tribunal in case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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