TMI Blog2003 (2) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... HA. JUDGMENT D.K. SETH J.-In this case the petitioner-appellants were subjected to voluntary retirement pursuant to a Voluntary Retirement Scheme (Scheme) by the employer respondent. The scheme appears at page 21 of the paper book (annexure B to the writ petition). The respondent authority had been deducting tax at source under the provisions of section 192 of the Income-tax Act, 1961. This seems to have been clarified by the employer through annexure C at page 24 of the paper book. This has since been challenged by the employees' association, the petitioners/appellants, as not chargeable to tax in view of clause (10C) of section 10 of the Income-tax Act. According to Mr. Bagchi, learned counsel for the appellants, the amount received under the scheme is an amount referred to in section 10(10C) and became due and payable at the time when the voluntary retirement under the scheme took place and chargeable to tax under section 15 clause (a), of the said Act, whether paid or not. If the payment is spread over for a period, according to the scheme, it would not be chargeable to tax bereft of clause (10C) of section 10 because of its payment even at subsequent assessment years tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees in services. Since the employees themselves have opted with their eyes open with the modification in the scheme they are estopped from claiming any benefit under section 10(10C). He contends that section 192 of the Income-tax Act casts a liability on the respondent. Therefore, they had rightly deducted the tax at source. He has also hinted at the second proviso to section 10(10C) and contended that since such benefit, if available by stretching the meaning even then the benefit can be allowed for one assessment year, it cannot be allowed for any subsequent assessment years. Mr. Some, learned counsel for respondent No. 4, on the other hand, has contended that the scheme is in conflict with rule 2BA. He has pointed out to the material differences from the scheme itself. According to him, the benefits under the scheme are different. In some cases, it is 100 per cent., in some case 90 per cent. and in some case 80 per cent. and includes leave, gratuity and other benefits. Therefore, it cannot be construed to be the payment receivable on account of voluntary retirement. On the other hand, these are payments in lieu of those components. This would definitely make the said payment " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be re-employed in another company or concern belonging to the same management. If we paraphrase this provision, we may read that a retiring employee shall not be employed in another company or in any other concern belonging to the same management. Both another company and another concern was intended to mean to belonging to the same management as expressed by the Legislature. Therefore, the scheme cannot be said to be in conflict with the requirement of rule 2BA. Inasmuch as, clause (8) of the scheme clearly lays down that a retiring employee shall not be eligible for employment in any of the plant, subsidiaries or joint ventures of the SAIL. This is in consonance with clause (v) of rule 2BA. Mr. Some has pointed out that the amount of benefit sought to be provided under clause (4) of the scheme is in conflict with the requirement clause (vi) of rule 2BA. The benefit, as appearing from clause 4.1(i), indicates that the monthly benefit would be an equivalent of specific percentage of the basic pay and dearness allowance on the date of voluntary retirement and it shall be payable for a period of ten years or till attainment of 58 years of age, whichever is earlier. But, in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terally or grammatically would be something other than the terminal benefits. Inasmuch as, the terminal benefits are otherwise payable on cessation of employment under the provisions of the statute. An employee cannot be deprived of such dues on any ground whatsoever unless provided in the respective statutes governing those respective terminal benefits. An expression used in the statute is not always to be interpreted literally or grammatically. Sometimes it has to be interpreted having regard to the context in which the expression is used and having regard to the object and purpose for which the same is enacted. Section 10(10C) was inserted in order to make voluntary retirement attractive so as to reduce human complements for securing economic viability of certain companies. This object was elaborated by various departmental circulars and explanatory statements issued from time to time. Similarly, rule 2BA, which was inserted by the Income-tax (Sixteenth Amendment) Rules, 1992, was amended from time to time. All these go to show that this was intended to make the voluntary retirement more attractive and beneficial to the employee opting for voluntary retirement. Therefore, this h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struing an enactment, the absurdity and mischief are to be avoided. If a plain literal interpretation of statutory provision produces a manifestly absurd and unjust result, which the Legislature could not have intended, the court is supposed to modify the language used by the Legislature even to do some violence to it so as to achieve the obvious intention of the Legislature and produce a rational construction. It was so held in K.P. Varghese v. ITO [1981] 131 ITR 597 (SC). We, however, as discussed above, do not find any absurdity or any unjust result having regard to the provision with which we are concerned. Now let us examine as to what extent the amount receivable under the scheme qualifies for exemption under section 10(10C). The encashment of leave pay or half pay leave [clause 4.1(ii)] though payable with the monthly benefit, in terms of clause 4.1(iii), yet the same is not a component of monthly benefit provided in clause 4.1(i) of the scheme, as is the case with regard to clause 4.1(iv), (v) and (vi) of the scheme. It is only the monthly benefit provided under clause 4.1(i) of the scheme that represents the amount exempted under section 10(10C). The amounts mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts payable come under section 10(10C) and the same is being paid in accordance with the scheme framed for voluntary retirement, now we are to examine whether it would be hit by the second proviso to section 10(10C). The second proviso provides that exemption to clause (10C) to the extent that the benefit of exemption is available only in one assessment year and would not be available for any other assessment year, once availed of. According to Mr. Some and echoed by Mr. Banerjee, the payment having stretched over to a longer period than one assessment year, the payments made in subsequent assessment years are hit by the said proviso. Admittedly, the provisos are exemptions carved out of the principal section. But, this question has to be dealt with having regard to sections 15 and 17, read with section 43(2) of the Income-tax Act. Section 43(2) defines the expression "pay" which includes the incurring of the liability as well. Whereas section 15(a) provides chargeability of salary to tax as soon it becomes due, though not paid. As soon the salary becomes due, the incurring of the liability is complete. As soon the liability is incurred, it becomes a deemed payment in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Mitter [1994] 73 Taxman 437, 442 (Cal) (paragraph 8), we had occasion to so hold in the decision in Maynak Poddar (HLIF) v. WTO (I.T. Appeal No. 84 of 1999, dated February 24, 2003) (sic). For all these reasons, we are unable to pursuade ourselves to agree with the contention argued with ability by Mr. Some and Mr. Banerjee to the extent it relates to the amount receivable under clause 4.1(i) of the scheme. The appeal, therefore, succeeds to that extent. The respondent shall adjust the amount of tax already deducted, in respect of the amount exempted, with the tax payable hereafter on the other amounts or on the amount beyond rupees five lakhs, under the said scheme, if there be any, and refund the balance, if any remaining out of taxes already deducted. In case any amount remaining after adjustment, in that event, such amount be refunded to the respective employees within a period of three months of the instalment last payable or within one year from date whichever is later by the concerned authority with whom the tax is lying in deposit. However, the respondent SAIL shall recalculate the amount adjustable or refundable, as the case may be. Such calculation relating to the res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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