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TMI Blog2011 (5) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... imed from the income salary. In response, it was submitted by the assessee that the assessee has resigned as CEO of M/s Hygenic Research Institute with effect from 31-12-2004. Thereafter, the assessee was admitted a partner in the same firm M/s Hygenic Research Institute with effect from 1-1-2005 in the capacity as Karta of Kailash Chabra HUF vide partnership deed dated 14-3-2005. The assessee on resignation has received gratuity and leave encashment amounting to Rs. 6,50,000 i.e., Rs. 3,00,000 as leave encashment and further Rs. 3,50,000 as gratuity, which was claimed exempted under section 10(10AA)(ii) and under section 10(10)(iii) of the Act, respectively. In the assessment the Assessing Officer has observed that as per the provisions of section 10(10AA)(ii) and section 10(10)(iii) the exemption is available only on retirement and not on resignation. It was further observed that as per the assessee's letter dated 23-10-2007 he has resigned as CEO of M/s Hygenic Research Institute, which cannot be termed as retirement. For this proposition, the Assessing Officer has relied on the order of the Tribunal in the case of ITO v. Capt. S.S. Dhillon [1987] 27 TTJ 156, wherein it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. At the time of hearing, the learned counsel for the assessee while reiterating the same submissions as submitted before the Assessing Officer and the learned Commissioner of Income-tax (A) strongly relied on the decision of the Hon'ble Jurisdictional High Court in the case of D.P. Malhotra (supra), wherein it has been held that the word "retire" under section 10(10AA) of the Act is of wide import and includes retirement by resignation thus leave encashment on resignation is therefore eligible for exemption under section 10(10AA). He, therefore, submits that the facts of the assessee's case are similar to the case decided by the Hon. jurisdictional High Court, therefore following the same the exemption of Rs. 6,50,000 as claimed by the assessee be allowed in full. With regard to the decision in the case of McDowell & Co. Ltd. (supra) relied on by the learned Commissioner of Income-tax (A), he submits that in view of the above decision (supra), the reliance placed by the learned Commissioner of Income-tax (A) in the case of McDowell & Co. Ltd. (supra) is not applicable. 6. On the other hand, the learned DR supports the order of the Assessing Officer and the learned Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he word "retirement" has not been used in clause (10AA) in the restricted sense to mean "retirement on superannuation". On the other hand, it is clear from the language of clause (10AA) itself that it has been used in the widest possible terms to mean and include all cases of retirement, whether on superannuation or otherwise. What is relevant is "retirement" - how it took place is immaterial for the purpose of this clause. It is, therefore, clear that if on retirement, even on resignation by the employee, an employee gets by way of leave encashment any amount, section 10(10AA) would apply and the assessee will be entitled to the benefit of the said clause to the extent mentioned therein. 7. We are supported of our above opinion by the decision of the Madras High Court in CIT v. R.J. Shahney [1986] 159 ITR 160 (Mad.) : TC 32R.558. In that case also the assessee had resigned and retired from employment. The contention of the revenue was that since the words "whether on superannuation or otherwise" qualified retirement, unless it was a case of retirement from service on attaining a particular age, or some other reason, a case of resignation would not take in. Repelling this contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the loss irrespective of the fiscal impact. The minority view in Griffiths case which was followed in Finsburry Securities [1966] 43 TC 591 (HL) and Lupton [1971] 47 TC 580 (HL) would make no difference, because, the facts in those cases are wholly distinguishable. The decision of the Apex Court in the case of CCE v. Modi Alkalies & Chemicals Ltd. (171 ELT 155) is also distinguishable on facts because, in that case, the finding recorded was that both the entities were interdependent and there was common financial management. In the present case, admittedly mutual fund and the assessee are two independent and wholly unconnected entities." 10. In the present case merely because the assessee has joined the said firm as partner in the capacity of Karta of HUF with effect from 1-1-2005 after resigning as CEO from M/s Hygenic Research Institute on 31-12-2004 does not mean that there is a colourable device as the exemption of retirement benefits i.e., leave encashment and gratuity was claimed by the assessee under the relevant provisions of the Act, supported by the decision of the Hon. Jurisdictional High Court in the case of D.P. Malhotra (supra) and moreover it is not the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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