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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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e ownership or management of the undertaking in which he is employed from the employer in relation to that undertaking to a new employer, shall be deemed to be compensation received at the time of his retrenchment if- the service of the workman has been interrupted by such transfer ; or the terms and conditions of service applicable to the workman after such transfer are in any way less favorable to the workman than those applicable to him immediately before the transfer ; or the new employer is .....

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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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he assessee. The amount ₹ 6.5 lakhs was received by him as ex-gratia as a result of out of court settlement of the dispute with his employer. The services were only terminated after the assessee received the said ex-gratia payment of ₹ 6.5 lakhs. The payment is voluntary as a result of a private settlement. This does not have the character of retrenchment compensation. The assessee was not retrenched but had deemed to have resigned after receiving ex-gratia payment. The Commissioner .....

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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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= Does the proposed amendment in Section 28 in Finance Bill, 2018 prevents a tax payer from exemption under section 10(10B)? If so, is it applicable only for FY18-19 income? - Reply By MohamedSheikIbrahim KaderSahib - The Reply = The following news talks about the amendment. https://economictimes.indiatimes.com/news/economy/policy/sacked-staff-to-now-pay-tax-on-compensation/articleshow/62761330.cms - Reply By DR.MARIAPPAN GOVINDARAJAN - The Reply = The amendment will take effect from 01.04.2019 .....

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