TMI Blog2022 (2) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... own its business operations in India. The receipt of severance pay though the nomenclature is not mentioned as ex- gratia but takes the character of a capital receipt and the payment was made voluntary by the employer for loss of employment. and such capital receipt is not taxable in the hands of the assessee. Accordingly, we set aside the order of the CIT(A) and direct the Assessing officer to delete the addition and allow the grounds of appeal in favour of the assessee. - ITA No.1720/Mum/2021 - - - Dated:- 15-11-2021 - Shri M Balaganesh, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Appellant : Shri. Gunjan Kakkad. AR For the Respondent : Shri. Mehul B. Jain. DR ORDER PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals)-(NFAC) Delhi passed u/s 143(1) and 250 of the Act. The assessee has raised the following grounds of appeal: Ground No. 1: No adjustment to total income was warranted 1. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre [hereinafter referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. On the facts and circumstances of the case and in law, the Appellant submits that the income-tax department must be directed to grant credit for tax deducted at source in accordance with law. 11. The appellant craves leave to add, to alter and / or amend all or any of the foregoing grounds of appeal. 2. The Brief facts of the case that the assessee is an employee and filed the return of income for the A.Y 2017-18 on 01.08.2017 disclosing a total income of ₹ 35,32,970/-. The assessee s income consists of income from salary, loss from house property and income from other sources. The assessee has received the intimation u/s 143(1)of the Act on 04.05.2018 by email, where the A.O.(C P C) has assessed the total income of ₹ 1,16,46,980/-and raised a demand of ₹ 36,71,880/-. During the financial year under consideration, the assessee has received an amount of ₹ 74,28,585/- towards severance pay due to loss of employment from the employer M/s.AREVA India Pvt Ltd because of shutting down the business operations in India. The assessee was working with the AREVA group from the year 2006. The assessee has received the intimation with the addition of severan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment and is a part of the salary income. Further it cannot be treated as capital receipt and supported the order of the CIT(A). 7. We have heard the rival submissions and perused the material on record. Prima-facie, the disputed issue envisaged by the Ld.AR is with respect to adjustments not permitted u/s 143(1) of the Act and on the merits of the case in respect of voluntary severance payment received from the employer to be treated as capital receipt. Though the Ld.AR has raised the grounds of appeal on legal aspects and on the merits of the case but has restricted his arguments to the extent of merits of the claim. The contentions of the Ld.AR are that the assessee was in employment with the M/s.AREVA India Pvt Ltd from the year 2006 but due to shutting down of business operations in India the assessee has lost his employment. The Ld.AR demonstrated a letter dated 31.05.2016 issued by the company at page 104 of the paper book disclosing the facts that due to various reasons and ongoing business situation the company was close down. As per the conditions, the assessee is eligible for onetime severance payment along with full and final settlement. 8. The Ld.AR submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had, by its letter dated July 3, 1969, stated that in view of the closure of the business of the company, the assessee would be paid the requisite three months' salary as well as the amount due on account of his leave and in addition, he would be paid an ex gratia sum of ₹ 24,933 which would be subject to income- tax. 2. The Tribunal has, on a review of the matters on record, found that this amount was received by the assessee as a capital receipt. It has further found that it was really an ex gratia payment; it was not compensation within the meaning of Section 17(3). The Tribunal took the view that the word compensation denotes an idea that it is paid in lieu of something which the assessee could claim as of right and of which he was being deprived. The amount in question was an ex gratia payment, i.e., it was paid by the employer voluntarily without being under any obligation to pay it. 3. Section 17 deals with salary, perquisite and profits in lieu of salary. Clause (3) reads : (3) 'profits in lieu of salary' includes- (i) the amount of any compensation due to or received by an assessee from his employer or former employer at or in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio of the decision to the present case, the fact remains that the assessee was paid severance pay due to loss of employment because of shutting down of business operations in India. Further, such payment takes the character of a capital receipt and cannot be considered taxable u/s 17(3)(i) as a compensation. The assessee has received the onetime payment and it is not recurring in nature. We are of the substantiate opinion that the assessee has lost his employment which was continued from the year 2006. The letter dated 31.05.2016 was in respect of severance payment received by the assessee though specifically does not mention the term ex- gratia but the fact remains that the assessee has lost his employment at the instance of the employer closing down its business operations in India. We are of the considered view that the receipt of severance pay though the nomenclature is not mentioned as ex- gratia but takes the character of a capital receipt and the payment was made voluntary by the employer for loss of employment. and such capital receipt is not taxable in the hands of the assessee. Accordingly, we set aside the order of the CIT(A) and direct the Assessing officer to delet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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