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2022 (2) TMI 312 - AT - Income TaxNature of receipt - Voluntary severance payment received from the employer - Whether severance payment to the assessee is voluntary in nature and it does not amount to compensation within the provisions u/s 17(3)(i) ? - As per assessee he was in employment with the M/s.AREVA India Pvt Ltd from the year 2006 but due to shutting down of business operations in India the assessee has lost his employment - HELD THAT:- Assessee was paid severance pay due to loss of employment because of shutting down of business operations in India. Further, such payment takes the character of a capital receipt and cannot be considered taxable u/s 17(3)(i) as a compensation. The assessee has received the onetime payment and it is not recurring in nature. We are of the substantiate opinion that the assessee has lost his employment which was continued from the year 2006. The letter dated 31.05.2016 was in respect of severance payment received by the assessee though specifically does not mention the term “ex- gratia”but the fact remains that the assessee has lost his employment at the instance of the employer closing down its business operations in India. The receipt of severance pay though the nomenclature is not mentioned as ex- gratia but takes the character of a capital receipt and the payment was made voluntary by the employer for loss of employment. and such capital receipt is not taxable in the hands of the assessee. Accordingly, we set aside the order of the CIT(A) and direct the Assessing officer to delete the addition and allow the grounds of appeal in favour of the assessee.
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