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TMI Blog2017 (2) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, he held that payment made to the five employees were there legitimate dues, that same had to be treated as profit in view of salary, that the amount was assessable under the head income from salary, that tax was required to be directed by the assessee as per the provisions of section 192 of the Act. Vide his order dated 02/07/2010, he held that the assessee an A-I-D and raised the demand of Rs. 32, 00, 725/-[Rs. 25. 60 lakhs as tax under section 201 (1)+ interest of Ruby 6. 40 lakhs under section 201 (1A)]. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before him, it was stated that 69 employees were retrenched on 25/10/2001, that the issue had arisen with regard to payment made to five persons out of the group of 69 ex-employees, that settlement had taken place with all the ex-employees, who were retrenched, above a decade back, that full retrenchment compensation, gratuity, leaves salary and all other due employment benefits were paid all the 69 ex-employees at the time of their retrenchment/ secession of employment, that tax was deducted at source on payment of the dues, that the employees raised and Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ex-employees was capital compensation, that employees had already been effectively discharged from service, that they were paid the amounts after the withdrawal of their case/petition of any claim for retrenchment, that the payment was in consideration of their withdrawing/concluding litigations pending between them and the assessee, that the payments were not in the nature of salary or profit in view of salary, that there was no servant must relationship between the recipient of the amount and the assessee, that the AO had wrongly held that RLC had adjudicated the dues of ex-employees, that every receipt did not constitute income. It relied upon several case laws. 3. 1. After considering the available material, the FAA held that the settlement with the exemployees had taken place without the prior approval of the head office, that the assessee did not act upon the settlement, that the ex-employees approached the various judicial forums, that whole of the amount were forcibly recovered from the assessee, that the ex-employees arm twisted the assessee to recover their compensation as per the settlement arrived at, that their actions and commitments had not been consistent with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter travelled up to Hon'ble Bombay High Court, that money was forcibly recovered by the land revenue authorities, that the ex-employees had paid the taxes. He referred to page No. 42-44 of the paper book and relied upon the cases of Arun Bhai R. Naik (379ITR511), Captain, H. C. Dhanda(76ITR404)and Shyam Sundar Chhaparia (305ITR 181). The Departmental Representative (DR) supported the order of the AO. 5. We have heard the rival submissions and perused the material before us. We find that the assessee had retrenched 59 employees, that there was a lot of litigation between the both the parties i. e. employer and the employees, that five ex-employees, who were nearing their superannuation age, entered in to an agreement with the Regional office of the assessee, that the HO did not approve the agreement, that in the agreement the employees had agreed to pay taxes if they were paid their dues, that matter travelled up to Hon'ble Bombay High Court, that in pursuance of the judgment of the Hon'ble Court RLC ordered recovery of dues, that the Collector attached the bank account of the assessee and recovered the amount, that there was no occasion for the it to deduct the taxes, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e FAA held that the amount received by the assessee was not taxable and deleted the addition made by the Assessing Officer. The Tribunal held that the payment was not in the nature of an ex gratia payment or without there being any obligation on the part of the employer as claimed by the assessee. The payment was taxable within the meaning of section 17(3) which provides for inclusion of compensation received by an assessee from his employer or former employer at or in connection with the termination of his employment, as it could not be said that the payment received by the assessee was without any connection with the termination of his employment. Reversing the order of the Tribunal the Hon'ble Gujarat High court has held that amount paid in terms of the settlement, without there being any obligation on the part of the employer to pay any further amount to the assessee in terms of the service rules, would not take the character of compensation as envisaged under section 17(3)(i)of the Act. It further observed that the employer, voluntarily at its discretion, agreed to pay the amount to the assessee with a view to bring an end to the litigation, that there was no obligation cast u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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