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2018 (1) TMI 324 - AT - Income TaxEligibility for exemption u/s 10(10B) - ex gratia amount received by the employer, at the point of time of leaving the employment - treated as compensation at the time of retrenchment ? - Held that:- 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 about the wordings in the settlement deed, signed by him under these compelling circumstances, is being taken as the understanding about assessee’s 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 employees in the lower rung of hierarchy, we must not be too pedantic or hyper technical in approach. We have to be pragmatic in approach and we must give full effect to the true intent of the public welfare provisions. To us, the arrangement in question is nothing but a termination of employment with the offer of compensation. Viewed thus, the payment in question cannot be anything but a retrenchment compensation. The conditions of section 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 exemption will be the least of (i) actual amount received by the assessee; (ii) the amount specified by Central Government i.e. ₹ 5,00,000; and (iii) an amount calculated in accordance with the provisions of clause (b) of Section 25F of the Industrial Disputes Act, 1947 i.e. 15 day’s 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 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 examination of the quantification part in the light of the above observation. With these directions, the appeal is allowed in principle but remitted to the file of the Assessing Officer for limited verification as above.
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