TMI Blog2011 (5) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... e consequential relief be allowed to the assessee in respect of levy of interest u/s 234A and 234B, we hold and order accordingly - The grounds taken by the assessee are therefore partly allowed. - IT APPEAL NO. 2046 (MUM.) OF 2010 - - - Dated:- 27-5-2011 - D.K. AGARWAL, R.K. PANDA, JJ. K. Gopal and Jitendra Singh for the Appellant. R.K. Gupta for the Respondent. ORDER Shri D.K. Agarwal, Judicial Member. This appeal preferred by the assessee is directed against the order dated 3-12-2009 passed by the Learned Commissioner of Income-tax (A) for the assessment year 2005-06. 2. Briefly stated facts of the case are that the assessee an individual derives income from salary, house property, business income as partner in the firms, capital gain and income from other sources. The return was filed declaring total income of Rs. 49,84,640. During the course of assessment proceedings, the Assessing Officer inter alia observed that the assessee in Form No. 16 attached with the return of income from M/s Hygenic Research Institute claimed an exemption of Rs. 6,50,000 under section 10 of the Income-tax Act, 1961 (the Act). The assessee was asked to explain as to how th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s working prior to his resignation. Therefore, according to the Assessing Officer, the entire arrangement is merely a ploy to evade the tax. He has further held that exemption under sections 10(10) and 10(AA) are available only in case of retirement or termination of employment. Since the assessee s job profile has not changed and he has continued without any break in the same firm working under same capacity the assessee is not eligible for exemption as claimed. Accordingly, the exemption claimed was disallowed. 3. On appeal, the learned Commissioner of Income-tax (A) while agreeing with the views of the Assessing Officer in making the disallowance made by him also relied on the decision of the Hon ble Supreme Court in the case of McDowell Co. Ltd. v. CTO [1985] 154 ITR 148/122 Taxman 111 for the proposition that the entire arrangement made by the appellant is only to reduce his tax liability which is a colourable device and hence, he confirmed the disallowance made by the Assessing Officer. 4. Being aggrieved by the order of the learned Commissioner of Income-tax (A), the assessee is in appeal before us challenging in ground Nos. 1.1 to 1.3, sustenance of disallowance of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rement by resignation, therefore following the same the leave encashment and gratuity on resignation are allowable as exemption under section 10(10AA)(ii) and under section 10(10)(iii) of the Act. 8. In D.P. Malhotra's case (supra) the issue before their Lordships was as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the decision of the CIT(A) allowing deduction under section 10(10AA) of the Income-tax Act, 1961 even though the assessee resigned from the employment as per the salary certificate issued by the employer, viz., Shipping Corporation of India Ltd. ?" It has been held as under : "6. Thus both "retirement" and "resignation" result in the conclusion of the service career. In fact resignation from service is also one of the modes of retirement from service. Resignation is a voluntary act of the employee to retire from service. Once an employee resigns, his service stand terminated from the date on which his letter of resignation is accepted by the appropriate authority, unless there is any law or statutory rule governing the conditions of service to the contrary. In other words, on acceptance of resigna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s evident that the amount of excise duty paid by the buyer to the department was nothing but the sale price liable to be included in the sale consideration. In that context, it was held that the transaction was a colourable device. In the present case, none of the transactions are found to violate any of the legal provisions. Therefore, the decision of the Apex Court in the case of McDowell Co. Ltd. does not support the case of the revenue. It is pertinent to note that the Apex Court in the case of Azadi Bachao Andolan [2003] 263 ITR 706 has held that every transaction or arrangement which is perfectly permissible in law, but has the effect of reducing the tax burden of the assessee cannot be treated as illegitimate and ignored. In the present case, the assessee has demonstrated that the units were purchased for earning dividend income and that the sale of the units immediately after receiving the dividend was a commercial decision taken by the assessee. Even the majority decision in the case of Griffiths [1965] 58 ITR 328 (PC) supports the case of the assessee that the transaction in question was a trading transaction and in the absence of any allegation that it was a sham tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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