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TMI Blog2022 (4) TMI 1269X X X X Extracts X X X X X X X X Extracts X X X X ..... xamine the issue "Relief u/s. 89". The relevant information as submitted by the assessee are, assessee has submitted Form 10E in support of his claim after relief u/s.89(1) along with the copy of Form -16 issued by employer M/s.Century Textiles and Industries Limited. The background of the issue is M/s.Century Textiles and Industries Limited was incurring heavy losses and shut down its Worli Textile Mill Unit in 2008. Around 6300 of its 6600 Mill workers opted for the voluntary retirement scheme, however, 275 workers had opposed for closure of the Mill. Assessee is one of the 275 employees who did not opt for voluntary retirement scheme declared by the company on 13.11.2006. The company in its application to the Labour Commissioner inter-alia offered to pay an ex-gratia amount of compensation to each of the 275 employees provided they 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed that the one time lump sum ex-gratia amount was towards full and final settlement and no claim would lie against any remuneration, compensation, ex-gratia or any other benefits. 5. In accordance with the Supplementary agreement dated 25/11/2016, the Company has computed the total dues payable by the Company to the assessee till he attains 63 years of age to be Rs..59,15,934/-. The company has paid the 'one time lump-sum ex-gratia amount' of Rs..42,09,968/- after deducting income tax of Rs..17,05,966/- as per the provisions of Section 192 of the Act. The Company in the said agreement has explained that the one time lumpsum ex-gratia amount is deemed 'salary' paid to an exemployee in advance within the meaning of the provisions of the Act, it has therefore, deducted tax at source in accordance with the 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 fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause notice was issued to the assessee on 20.12.2019 asking him to explain why the amount received should not be treated as compensation on termination of employment. 10. In response assessee submissions as under: - "10. The assessee in his reply has claimed that vide supplementary agreement, the employee agreed for lump sum ex-gratia amount of Rs. 59,15,934/-. The Company has computed the total dues payable by the Company to the assessee till he attains 63 years of age. The company has paid the 'one time lump-sum ex-gratia amount' of after deducting income tax as per the provisions of Section 192 of the Income Tax Act, 1961. The Company in the said agreement has explained that the one time lump sum ex-gratia amount is deemed 'salary' paid to an exemployee in advance within 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 em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he closure of the Company. .... In view of the above, the relief u/s. 89 of the Income-tax Act, 1961 in the case of the assessee is restricted to Rs..3,01,889/-. Penalty proceedings under section 270A is initiated separately for underreporting of income in consequence of misreporting of income." 12. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) sustained the view of the Assessing Officer with the following observations: - "From a perusal of above, it is noted that the facts of the case of the Appellant is squarely covered under Rule 21A(1)(c) of the Income Tax Rules and the Relief under Section 89 of the Income Tax Act, 1961 is to be computed in accordance of Rule 21A(4) of the Income Tax Rules. It is further 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.08.1984. He submitted that the above said case law are exactly similar to the facts of the assessee's case. 15. On the other hand, Ld. DR submitted that assessee is an ex-employee and received the compensation as ex-gratia as per the letter issued by the company. It clearly indicates that it is only a compensation not advance salary, in this regard she relied on the finding of the Ld.CIT(A) and brought to our notice Para No 10 of the order of the Ld.CIT(A). 16. Considered the rival submissions and material placed on record, we observed from the record that assessee is one of the employee who did not agree for the voluntary retirement scheme offered by the company and subsequently company has pledged 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances it was held that the sum of pound 94,000 was received by the respondent of that case not under the contract of employment nor as remuneration for services rendered or to be rendered but as compensation for giving up a right to remuneration. We are unable to see how that decision is of any help to the appellant in the present case. It seems clear to us that in the present case the appellant has surrendered no rights under the contract; what has been paid to him has been paid under the terms of contract and as salary which he would have earned if twelve months' notice had been given to him. As no notice was given he was treated as though he was in service and entitled to salary for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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