TMI Blog2022 (4) TMI 1269X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany after considering that these are one time lumpsum ex-gratia amount payable to the employee and settled the same after deducting the TDS as per the provision u/s. 192 - We observe from the record that company in the supplementary agreement has explained that the one time lumpsum ex-gratia amount is salary paid to the ex-employee in advance and accordingly, it has deducted tax at source in accordance with the provisions of the I.T. Act. In this regard the company also issued Form 16 to the assessee for the relevant year 2016-17. On careful consideration of the facts on record we observe that even though the textile unit was closed on 2008 and assessee has refused to agree the voluntary retirement scheme offered by the company and under protest assessee and similar employees managed to get compensation through Labour Commissioner and as per the directions of the Labour Commissioner, as agreed by the company, the assessee was awarded the compensation for the remaining period of service till the age of 63 years. The basis of compensation calculated by the company and the company also treated the one-time compensation as a salary paid in advance and deducted the TDS on the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y accept the closure and termination of their services without agitating the issue or obstructing the development of the entire Mill land. The company offered to earmark a piece of land admeasuring 1.08 acres out of the total Mill land which would not be developed or otherwise dealt with till the entire amount of all the employees have been paid. 3. The above said application was decided by the Labour Commissioner vide his order dated 11.01.2008 granting permission to the company to close down its Textile Mill Unit at Worli. Accordingly, by notice dated 12.01.2008, unit was closed down and services of all the 275 employees terminated w.e.f 12.01.2008. The Government of Maharashtra vide letter no TPB-4308/317/CR/182/08/UD011 dated 30.09.2008 addressed to Municipal Corporation imposed the following conditions on the company, to safeguard the interests of the 275 workers who had not opted for voluntary retirement scheme. i. The plot measuring 1.08 acres was to be reserved for the 275 ex-workers till the last of these workers completes the age of 63 years and till then the plot cannot be sold or developed. ii. if the Company fails to effect ex-gratia payment to the ex-worke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant provisions of the income tax act, 1961, as stated above. Form 16 has been duly issued to the assessee by the Company for the relevant F.Y 2016-17 certifying deduction of tax. In the return of income for the A.Y 2017-18, the assessee has claimed relief u/s.89(1) of the I.T. Act, 1961 on the compensation received by him, duly uploading Form 10E along with the ITR filed on the e-filing site. The total income declared is ₹.61,04,260/- with tax of ₹.59,890/-. Relief u/s.89(1) has been claimed as ₹.16,46,076/-. The assessee has also submitted the computation chart of the compensation as provided by the Company. As per the computation chart, for F.Y. 2016-17, the assessee received monthly payment as per the terms of agreement dated 26.02.2010. For the month of November 2016, a total amount of ₹.1,73,855/- is shown. The chart also gives a year-wise break-up of the computation of the lumpsum amount, on the basis of amount payable to the assessee from F.Y 2016-17 till F.Y 2036-37, when he attains 63 years of age. 6. Verification of Form 10E uploaded by the assessee reveals that the he has claimed relief in Annexure I of the Form, which pertains to arrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the meaning of the provisions of the Income Tax Act, 1961, it has therefore, deducted tax at source in accordance with the relevant provisions of the Income tax Act, 1961. 10.1 According to the assessee, the amount is advance salary for the period 2017-18 to 2036-37, till the employee attained 63 years of age. The assessee also submits that even though the assessee vide agreement agreed to termination of employment, it was subject to him receiving compensation by way of salary plus DA upto the age of 63 years, The amount paid represents salary received for future years in advance. As the entire salary for future years has been received in the current year, it has been offered to tax. If the amount had been received in installments every year, he would have offered the same to tax in those respective years. Relief u/s 89(1) has been claimed for relief on account of the substantial tax burden due to the entire amount received in the current financial year. 11. After considering the submissions advanced by the assessee Assessing Officer rejected the same and observed as under: - The nature of payment received by the assessee, by his own claim, falls within the purvie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r noted from a perusal of the impugned assessment order that the AO has rightly invoked the Rule 21A(1)(c) in the case of the Appellant. The Appellant has relied on various judicial pronouncements in support of his submissions. However, with due respect to Hon ble Courts, it is worthwhile to mention here that in order to allow Relief under Section 89 of the Income Tax Act, 1961 by treating the compensation received by the Appellant as salary for each year in future upto AY 2035-36 i.e. the year in which the Appellant attains the age of 63 as per the agreement, it is necessary to consider the income of the Appellant for each such year other than the salary in question. It is not possible to ascertain income of Appellant for future years and it can also not be concluded that the Appellant would not earn any Income in future years. As such, it is practically not possible to ascertain the actual amount of relief to be allowed to the Appellant under Section 89 of the income Tax Act, 1961. In view of above discussion, I find no reason to interfere with the assessment order passed by the AO. The above grounds of appeal of the Appellant is, accordingly, dismissed. 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledged a piece of land for the benefit of 275 employees who are not agreed for the voluntary retirement scheme compensation. Subsequently owing to the order of the Labour Commissioner and Municipal Corporation of the Greater Mumbai which imposed certain conditions on the company to safeguard the interest of the 275 workers who had not opted for voluntary retirement scheme. 17. Subsequently individual employees and the company entered into supplementary agreement and the company agreed to compute the total compensation payable by the company till they attain 63 years of age and accordingly in the case of the assessee it was determined to be at ₹.59,15,934/-. The company after considering that these are one time lumpsum ex-gratia amount payable to the employee and settled the same after deducting the TDS as per the provision u/s. 192 of the Act. We observe from the record that company in the supplementary agreement has explained that the one time lumpsum ex-gratia amount is salary paid to the ex-employee in advance and accordingly, it has deducted tax at source in accordance with the provisions of the I.T. Act. 18. In this regard the company also issued Form 16 to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or twelve months and that was what was paid to him. It is difficult to see how such payment can be treated as compensation for loss of office. The present case is similar to the two cases of Henry v. Arthur Foster and Henry v. Joseph Foster [1932] 16 Tax Cas. 605 and Henry s Case (supra) and different from the case of Hunter v. Dewhurst (supra). In the first two cases the respondents were directors of a limited company. They had no written contracts of services with the company but Article 109 of the company's articles provided that in the event of any director who held office for not less than five years, dying or resigning or ceasing to hold office for any cause other than misconduct, bankruptcy, lunacy or incompetence, the company should pay to him or his representatives by way of compensation for loss of office a sum equal to the total remuneration received by him in the preceding five years. The respondents resigned office as director in these two cases and received from the company as compensation a payment calculated in accordance with Article 109. It was held by the Court of Appeal that the payment constituted a profit of the office of Director and was properly a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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