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EXEMPTION UNDER SECTION 10(10B) OF INCOME TAX ACT, 1961

Income Tax - By: - Mr.†M. GOVINDARAJAN - Dated:- 9-2-2018 Last Replied Date:- 9-7-2018 - Section 10(10B) of the Income Tax Act, 1961 provides that in computing the total income of a previous year of any person any compensation received by a workman- under the Industrial Disputes Act, 1947, or under any other Act or Rules, orders or notifications issued there under or under any standing orders or under any award, contract of service or otherwise, at the time of his retrenchment. The amount exempt .....

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the need for extending special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances approve in this behalf. For the purposes of this section- compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment ; compensation received by a workman, at the time of the transfer (whether by agreement or by operation of law) of th .....

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, under the terms of such transfer or otherwise, legally not liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer; In Vishnu Mohan T. Nair V. Income Tax Officer - 2018 (1) TMI 324 - ITAT AHMEDABAD the assessee is a former employee of a Vadodara based company. He had taken up employment in the company in terms of appointment letter dated 25.10.1990. His employment was confirmed o .....

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e the Tribunal set aside the transfer order of the assessee. The employer challenged the order of the Tribunal before the High Court. In the meantime both arrived at a settlement wherein ex-gratia amount is directed to be paid to the assessee at ₹ 6.5 lakhs and the assessee ceased to be in employment of the said employer. The assessee was paid ₹ 6.5 lakhs as an ex-gratia amount by the employer, at the point of time of leaving the employment. The assessee claimed exemption under secti .....

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hem was on account of assessee s transfer to Mumbai from Vadodara and not on account of retrenchment of the assessee. There was no reference in the order of the Industrial Tribunal about retrenchment. The employer also filed a case before the High Court challenging the order of the Industrial Tribunal with reference to the assessee s transfer and not with reference to the retrenchment or compensation. The Industrial Tribunal or the High Court never granted any compensation or monetary award to t .....

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(Appeals) held that the payment received by the assessee from his employer was in the nature of ex-gratia payment and does not have the character of retrenchment compensation. The Commissioner (Appeals) dismissed the appeal filed by the assessee. Aggrieved against the order of Commissioner (Appeals), the assessee filed appeal before the Appellate Tribunal. The Tribunal analyzed the provisions of section 10(10B) of the Act. Section 10(10B) of the Act defines the amount eligible for exemption unde .....

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by the Tribunal was admittedly under the Industrial Disputes Act, 1947 and once it is held that the said order stands modified so as to take into account the payment of ₹ 6.5 lakhs by the employer, the said payment cannot but be treated as a compensation under the Industrial Disputes Act, 1947. Thus the first limb of section 10(10B) of the Act is satisfied. The next question then is whether the said compensation can be said to have been paid at the time of retrenchment. The Tribunal relied .....

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