TMI Blog2018 (1) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of employment with the offer of compensation. Viewed thus, the payment in question cannot be anything but a retrenchment compensation. The conditions of section 10(10B), so far as eligibility for exemption is concerned, is satisfied. That, however, is not the end of the matter. As regards the amount eligible for exemption under section 10(10B), it is specifically provided in the aforesaid section that the amount eligible for exemption will be the least of (i) actual amount received by the assessee; (ii) the amount specified by Central Government i.e. ₹ 5,00,000; and (iii) an amount calculated in accordance with the provisions of clause (b) of Section 25F of the Industrial Disputes Act, 1947 i.e. 15 day s average pay for every completed years of services or part thereof in excess of 6 months. One of the important restrictions on the amount eligible for exemption under section 10(10B) is that it should not exceed fifteen days average pay for every completed years of services or part thereof in excess of six months This aspect of the matter has not been examined at all. We, therefore, uphold the claim in principle but remit the matter to the file of the AO for examination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Hon ble High Court. However, when the matter came up for final hearing on 25th June 2007, Hon ble High Court was informed that both the parties arrived at settlement dated 21st April 2007 wherein ex gratia amount is directed to be paid to the respondent at ₹ 6,50,000 and the assessee ceases to be in employment of the said employer. Hon ble High Court also noted the submission of the employer s counsel that amount of provident fund, gratuity, leave encashment and other service benefits, which are available to the respondent will be paid by the petitioner (i.e. the employer) within a period of three weeks from the date of receiving the copy of this order . All these facts and submissions were taken on record, and, as noted by Hon ble High Court, order passed by the Tribunal was modified to that extent . It was in this backdrop that the assessee was paid ₹ 6,50,000, as an ex gratia amount by the employer, at the point of time of leaving the employment. 5. The assessee claimed exemption under section 10(10B) in respect of the above ex gratia amount that he received. This amount was treated as compensation at the time of retrenchment of the assessee. The Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver have and did in fact never, pass an order for assessee's reinstatement as claimed. The operative portion of the Industrial Tribunal's order dated 28.10.2004 reads as under- Transfer order dated 21.07.03 passed by the opponent ACNielsen ORG-MARG Pvt Ltd. is here by quashed and set aside. 'This order does not deliberate or adjudicate on the issue of reinstatement as claimed by A/R. 6.4 It is claimed by the assessee in para 4.3 of his submission that the said amount of ₹ 6,50,000/- was received by him under Industrial Dispute Act, is also factually incorrect. The Industrial Tribunal or Hon'ble Gujarat High Court never granted any compensation or monetary award to the assessee. They both only dealt with the issue of transfer of the assessee from Baroda to Mumbai. In any case, no compensation was granted by the Industrial Tribunal to the assessee, as none was sought. The said Tribunal order only quashed assessee's transfer order to Mumbai and awarded him cost of ₹ 5,000/-. This amount of ₹ 6,50,000/- was received by him as ex-gratia as a result of 'out of court' settlement of her dispute with his employer. His services were only terminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible for exemption under section 10(10B). As we explore this aspect of the matter, we find that section 10 (10B) of the Income Tax Act 1961 defines the amount eligible for exemption under this provisions as any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, at the time of his retrenchment . Clearly, therefore, an eligible amount has to be in the nature of, inter alia, compensation under the Industrial Dispute Act 1947, and it has to be paid at the time of retrenchment of an employee. As for the amount being in the nature of compensation under the Industrial Disputes Act, it is evident from a plain look at Hon ble High Court s judgment dated 25th June 2007, a copy of which is placed before us as well, that, while taking note of the payment of ₹ 6,50,000 by the employer, it was observed that order passed by the Tribunal was modified to that extent . The order passed by the Industrial Tribunal was admittedly under the Industrial Disputes Act 1947, and once it is held that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart, such an arrangement is de facto as also in the eyes of law an arrangement for termination of employment on payment of compensation. Lets recapitulate the basic facts of this case again. Here is a Vadodara based employee who is transferred to Mumbai and the employee considers such a transfer as an alternation to the terms of employment. He fights this transfer order tooth and nail and even wins the first round of litigation before the Tribunal. The matter does not end there. His employer, obviously with much better resources at his disposal, carries the matter before Hon ble High Court. The litigation drags on at Ahmedabad now and with the kind of resources that his employer has his commands and there is every possibility that it will go on for long time. Damocles sword still hangs on his head and four years have passed on since he was transferred to Mumbai. It is in this backdrop that the employer makes him an offer, which obviously he accepts, that in case the assessee is ready to leave the employment, in addition to all his normal terminal dues, he gets ₹ 6,50,000 as ex gratia compensation. In simple words, it is an offer for termination of his employment by the empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination of employment with the offer of compensation. Viewed thus, the payment in question cannot be anything but a retrenchment compensation. 10. In our considered view, the conditions of section 10(10B), so far as eligibility for exemption is concerned, is satisfied. That, however, is not the end of the matter. As regards the amount eligible for exemption under section 10(10B), it is specifically provided in the aforesaid section that the amount eligible for exemption will be the least of (i) actual amount received by the assessee; (ii) the amount specified by Central Government i.e. ₹ 5,00,000; and (iii) an amount calculated in accordance with the provisions of clause (b) of Section 25F of the Industrial Disputes Act, 1947 i.e. 15 day s average pay for every completed years of services or part thereof in excess of 6 months. One of the important restrictions on the amount eligible for exemption under section 10(10B) is that it should not exceed fifteen days average pay for every completed years of services or part thereof in excess of six months This aspect of the matter has not been examined at all. We, therefore, uphold the claim in principle but remit the matter to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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