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2023 (11) TMI 79 - AT - Income TaxRectification of mistake - nature of receipt - income received towards severance of employment - one time compensation received by the assessee from his employers towards Cessation and termination of his employment - amount not separately shown as “exempt income” - whether was a “capital receipt” and hence not chargeable to tax? - rectification was rejected by AO on the ground that the amount was not bifurcated by the assessee in the return of income - Whether order passed u/s. 143(1) of the Act could not have been rectified u/s. 154 of the Act since there was no mistake apparent from the record ? HELD THAT:- As on identical set of facts, in the case of Arunbhai R.Naik vs. ITO [2015 (10) TMI 2434 - GUJARAT HIGH COURT] held that where ex-gratia compensation paid to the assessee on his discharge was very voluntary in nature, it would not amount to compensation in terms of section 17(3)(i) of the Act. In the instant facts, we observe that on perusal of the terms of employment letter of the assessee, the aforesaid amount paid to the assessee as compensation towards discharge of his services was voluntary in nature, as is evident in the terms of employment. Accordingly, in our considered opinion, the case of the assessee was directly covered in his favour by case of Arunbhai R. Naik(supra). Thus severance compensation received by the assessee on voluntary basis towards termination of employment from his employers is a “capital receipt” and, hence, not taxable in the hands of the assessee. Further, even the Department has not contested the claim of the assessee that the aforesaid amount is not taxable in the hands of the assessee as his income. The same should not have been taxed in the hands of the assessee as his taxable income and the same was liable to be deleted u/s. 154 of the Act. Decided in favour of assessee.
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