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2022 (4) TMI 1179 - AT - Income TaxClaim of the assessee u/s. 89 r.w. Rule 21A of I.T. Rules - compensation received by the assessee as only salary received in advance - payments made to the employees are in the nature of the lumpsum ex-gratia payments - why the amount received should not be treated as compensation on termination of employment? - HELD THAT:- As observed from the record that assessee is one of the employee who did not agree for the voluntary retirement scheme offered by the company and subsequently company has pledged a piece of land for the benefit of 275 employees who are not agreed for the voluntary retirement scheme compensation. Subsequently owing to the order of the Labour Commissioner and Municipal Corporation of the Greater Mumbai which imposed certain conditions on the company to safeguard the interest of the 275 workers who had not opted for voluntary retirement scheme. Subsequently individual employees and the company entered into supplementary agreement and the company agreed to compute the total compensation payable by the company till they attain 63 years of age and accordingly in the case of the assessee it was determined. The company after considering that these are one time lumpsum ex-gratia amount payable to the employee and settled the same after deducting the TDS as per the provision u/s.192. We observe from the record that company in the supplementary agreement has explained that the one time lumpsum ex-gratia amount is salary paid to the ex-employee in advance and accordingly, it has deducted tax at source in accordance with the provisions of the I.T. Act. In this regard the company also issued Form 16 to the assessee for the relevant year 2016-17. On careful consideration of the facts on record we observe that even though the textile unit was closed on 2008 and assessee has refused to agree the voluntary retirement scheme offered by the company and under protest assessee and similar employees managed to get compensation through Labour Commissioner and as per the directions of the Labour Commissioner, as agreed by the company, the assessee was awarded the compensation for the remaining period of service till the age of 63 years. The basis of compensation calculated by the company and the company also treated the one-time compensation as a salary paid in advance and deducted the TDS on the same, clearly indicates that the compensation received by the assessee is only salary received in advance not as termination compensation even though this was paid in lumpsum as ex-gratia in one go. Respectfully following the above said decision and the ratio laid down in V.D. Talwar [1963 (3) TMI 48 - SUPREME COURT] we are inclined to treat the compensation received by the assessee as only salary received in advance. Therefore, we direct the AO to allow the claim of the assessee u/s. 89 r.w. Rule 21A of I.T. Rules. Accordingly, the appeal filed by the assessee is allowed.
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