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2015 (6) TMI 29 - ITAT MUMBAI

2015 (6) TMI 29 - ITAT MUMBAI - TMI - Entitlement to exemption under section (10)(10C) - Held that:- As per section 10(10C), the scheme is to be framed as per the guidelines as may be prescribed. Further a perusal of the heading of rule 2BA shows that it prescribes the guidelines for the purpose of section 10(10c). The guidelines, as its nomenclature suggests, are just for the purpose of guidance, while framing the scheme of voluntary retirement by the institutes/companies and cannot be said to .....

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ranted under the section 10(10C) to an employee in view of the beneficial nature of the provision keeping in view the purpose and object sought to be achieved through such a provision. We, therefore, are of the view that denial of exemption to the assessee only because he has received compensation on his retirement a little more than the limit prescribed by rule 2BA, will be against the spirit of the provisions of the section 10(10C), especially, when no such limit has been prescribed under sect .....

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- Shri B.R. Baskaran And Shri Sanjay Garg JJ Fo the Appellant : Shri Anil Sathe, C.A. For the Respondent : Shri Asgharzain V.P., D.R. ORDER Per Sanjay Garg, Judicial Member: The above titled three appeals have been preferred by three different assessees. All the three appeals have been filed with the delay of 260 days. The assessees have filed separate applications for condonation of delay of citing identical reasons for delay in filing the present appeals. 2. It has been explained that along w .....

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ssees was denied and impugned demand was raised. 3. The assessees preferred appeals before the Commissioner of Income Tax (Appeals) [(hereinafter referred to as the CIT(A)] which were dismissed. Thereafter the assessees were advised by their counsel that since the claim of all the asesssees was identical, hence the decision in the appeal of one of the assessees will be followed in other cases. The present assessees, being retired employees and also taking into consideration the cost of litigatio .....

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to be followed in the case of the assessees, then the concerned chartered accountant informed them that the same cannot be applied in their case unless the present assessees prefer separate appeals. 4. It has been submitted that the assessees were under bonafide belief that the decision in the case of another colleague namely Mr. Pradeep Pandhare will be followed in the case of assessees and due to this, the delay has occurred in filing the present appeals. 5. The submissions have been supported .....

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section (10)(10C) of the Act. The Ld. A.R. of the assessee, at the outset, has stated that the issue under consideration based on identical facts has been raised by one of the colleagues of the assessees namely Mr. Pradeep Pandhare. The matter was considered by the Tribunal in his appeal bearing ITA No.6055/M/2013 for the A.Y. 2007-08 decided on 18.07.14 and the claim has been allowed in favour of the assessee by the Tribunal by holding that the assessee under the circumstances was entitled to .....

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and took voluntarily retirement for which he was paid compensation of ₹ 20,59,007/-. Initially this compensation was offered to tax but the assessee filed revised return claiming exemption of ₹ 5 lakhs u/s 10(10C). During assessment proceedings the Assessing Officer noticed that the compensation payable under the scheme of the employer did not satisfy conditions of Rule 2BA of the Income Tax Rules and the payment was more than the stipulated limits as per clause-(vi) of the Rule 2BA .....

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RS should not exceed amount equivalent to three months salary for each completed years of service or salary at time of retirement multiplied with balance number of months of service left. The tenure of the assessee with the Company was for 21.7 years and his age at time of retirement was 46.95 years and number of years left for retirement was 13 years. His eligible salary at time of retirement was ₹ 12,741 per month. Accordingly, amount specified under Rule 2BA was calculated as follows: - .....

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assessee was not entitled to exemption u/s 10(10C). Accordingly, the said exemption to the extent of ₹ 5 lakhs was disallowed and added to the total income returned. Aggrieved, the assessee filed appeal before the CIT(A). 4. The ld. CIT(A) observed that the compensation payable/paid exceeded both the limits set out in clause (vi) of Rule 2BA. The calculation given by the assessee was also erroneous. He therefore held that the action of the Assessing Officer in disallowing deduction u/s 10 .....

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e company voluntarily. The ld. AR further referred to the various clauses of the scheme wherein it has been mentioned that the compensation payable under the Scheme was exempt only to the extent permissible under Section 10(10C) of the Income Tax Act 1961 read with Rule 2BA of the Income Tax Rules, 1962 up to an amount of ₹ 5,00,000/-(Rupees Five Lakhs only). The tax benefit referred to above would be available only to an assessee who has completed 10 years of service in the Company or 40 .....

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her hand the ld. DR has relied upon the decisions of the lower authorities. 6. We have considered the rival submissions of the parties. The provisions of the section 10(10C) are intended to encourage the Voluntary Retirement and provides an exemption from tax up to the amount of rupees five lakhs to each employee retired under VRS. It being beneficial provision hence requires liberal interpretation. Kolkata Tribunal (Third Member decision) in the case of Krishna Gopal Saha (2009) 125 TTJ (KOL) ( .....

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o exemption U/S 10(10C) to the extent of ₹ 5 lakhs, even if the amount received exceeds the limits as prescribed by Rule 2 BA of the income tax rules. Further, the Hon ble Jurisdictional High Court of Bombay, in the case of CIT vs. Koodathil Kallyatan Ambujakshan (2008) 219 CTR (Bom) 80, has held that the guidelines/rule 2BA is procedural in nature and is to be read in harmonious construction with the substantive provisions of the Act. The Hon ble Kolkata High Court in the case of Sale DSP .....

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f such amount. It has been provided in first proviso to section 10(10C) that the schemes under this section are to be framed by the various institutes/companies in accordance with such guidelines as may be prescribed. A careful perusal of the provisions of section 10(10c) when read with rule 2BA of the Income Tax Rules shows that the substantive provisions of the Act do not prescribe any limit relating to the amount received or receivable by an employee on his voluntary retirement for exemption .....

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he heading of rule 2BA shows that it prescribes the guidelines for the purpose of section 10(10c). The guidelines, as its nomenclature suggests, are just for the purpose of guidance, while framing the scheme of voluntary retirement by the institutes/companies and cannot be said to be mandatory in nature but only procedural or guiding in nature. If the scheme as a whole, otherwise in accordance with the provisions of section 10(10C) and as per the guidelines under rule 2BA except as to some depar .....

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