2009 (4) TMI 180 - HC - Income Tax

Whether the amount paid to employees under the voluntary retirement scheme is entitled for deduction - On retirement the assessee received from the employer bank several dues including ex gratia. - assessee claimed exemption u/s 10(10C) and also claimed relief u/s 89(1) held that there is no prohibition to the twin benefits in respect of an amount received under the voluntary retirement scheme so assessee is entitled to exemption u/s 10(10C) and relief u/s 89(1) for the exgratia amount received from the employer bank

Summary

Issues:
1. Whether the amount paid to employees under the voluntary retirement scheme is entitled for deduction?

The judgment delivered by the High Court involved a case where the Revenue appealed against the order of the Income-tax Appellate Tribunal regarding the deduction of the amount paid to an employee under a voluntary retirement scheme for the assessment year 2001-02. The assessee, an employee of a bank, retired under the voluntary retirement scheme and received ex gratia among other dues. The assessee claimed exemption under section 10(10C) of the Income-tax Act for a portion of the ex gratia received. The remaining amount was treated as income. The assessee also claimed relief under section 89(1) of the Act while calculating the tax payable. The Assessing Officer granted exemption under section 10(10C) but rejected the relief under section 89(1). The Commissioner of Income-tax (Appeals) allowed the relief, which was further upheld by the Tribunal. The Tribunal relied on a previous Division Bench judgment that allowed both benefits - exemption under section 10(10C) and relief under section 89(1) - for amounts received under a voluntary retirement scheme. The High Court dismissed the Revenue's appeal based on the precedent set by the Division Bench judgment.

The primary issue in this case was whether the amount paid to employees under a voluntary retirement scheme is entitled for deduction. The High Court analyzed the provisions of the Income-tax Act, specifically sections 10(10C) and 89(1), in light of the assessee's claim for exemption and relief. The court noted that the assessee had received ex gratia under the voluntary retirement scheme and claimed exemption under section 10(10C) for a portion of the amount. Additionally, the assessee sought relief under section 89(1) while calculating the tax payable. The Assessing Officer granted exemption under section 10(10C) but denied the relief under section 89(1). The Commissioner of Income-tax (Appeals) allowed the relief, a decision upheld by the Tribunal. The High Court examined a Division Bench judgment that established the permissibility of claiming both benefits - exemption under section 10(10C) and relief under section 89(1) - for amounts received under a voluntary retirement scheme. The court emphasized that the relief under section 89(1) aims to alleviate tax burden due to progressive tax rates, and the term "salary" under section 17 has a broad definition that encompasses payments under such schemes. Consequently, the High Court dismissed the Revenue's appeal, upholding the assessee's right to both benefits for the amount received under the voluntary retirement scheme.

In conclusion, the High Court's judgment addressed the issue of whether the amount paid to employees under a voluntary retirement scheme is entitled for deduction. The court examined the provisions of the Income-tax Act, particularly sections 10(10C) and 89(1), in the context of the assessee's claim for exemption and relief. By referencing a previous Division Bench judgment, the High Court affirmed the permissibility of claiming both exemption under section 10(10C) and relief under section 89(1) for amounts received under a voluntary retirement scheme. The court highlighted the broad definition of "salary" under section 17, encompassing payments under such schemes, and emphasized the purpose of relief under section 89(1) to mitigate tax burden resulting from progressive tax rates. Consequently, the High Court dismissed the Revenue's appeal, affirming the assessee's entitlement to both benefits for the amount received under the voluntary retirement scheme.