TMI Blog2022 (5) TMI 1176X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the Co-ordinate Bench decision of this Tribunal in the case of Rajesh Shantaram Chavan [ 2022 (4) TMI 1179 - ITAT MUMBAI] as decided to treat the compensation received by the assessee as only salary received in advance. Therefore, we direct the AO to allow the claim of the assessee u/s. 89 r.w. Rule 21A of I.T. Rules. Accordingly, the appeal filed by the assessee is allowed. - ITA No.2095/Mum/2021 - - - Dated:- 19-5-2022 - Shri M.Balaganesh, Accountant Member And Shri Rahul Chaudhary, Judicial Member For the Assessee : Shri Ashish Thakurdesai For the Revenue : Shri Avanish Tiwari ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.2095/Mum/2021 for A.Y.2017-18 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-46, Mumbai in appeal No.CIT(A)-46, Mumbai/10364/2019-20 dated 20/09/2021 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 26/12/2019 by the ld. Asst. Commissioner of Income Tax-Circle-34(3), Mumbai (hereinafter referred to as ld. AO). 2. The grounds raised by the assessee are as under:- 1. On facts, in circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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. 3.4. The 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 12/1/2008, the unit was closed down and the services of all the 275 employees terminated w.e.f 12/1/2008. The Government of Maharashtra vide letter No.TPB-4308/317/CR/182/08/UD011 dated 30/9/2008 addressed to the Municipal Corporation of Greater Mumbai imposed the following conditions on the Company, to Safeguard the interests of the 275 workers who had not opted for VRS: 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-workers as per the provisions of its und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant 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. 3.8. In the return of income for the A.Y 2017-18, the assessee has claimed relief u/s 89(1) of the Act on the compensation received by him, duly uploading Form 10E along with the ITR filed on the e-filing site. The total income declared as per revised return of income is Rs.58,59,880/- with tax of Rs.33,765. Relief u/s 89(1) of the Act has been claimed at Rs.15,96,688/-. The assessee has also submitted the computation chart of the compensation as provided by the Company. As per the computation chart, for the financial year 2016-17 relevant to Asst Year 2017-18, the assessee received monthly payment as per the terms of agreement up to the month of November, 2016, a total amount of Rs.1,60 647/- is shown to be received by him during the year. The chart also gives a year-wise break-up of the computation of the lump sum amount, on the basis of amount payable to the assessee from Financial Year 2016-17 till Financial Year 2034-35, when he attains 63 years of age. 3.9. Verification of Form 10E uploaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o provide the following information:- 1. Details of payment made to the assessee in F.Y 2016-17. 2. To confirm nature of payment, whether the payment is advance of salary/compensation on termination of employment. 3. In case, the payments are in the nature of advance of salary, please specify the assessment years to which such payments relate. 3.13. The Company by letter dated 18/12/2019 has given the following reply:- 1. Form 16 for the period 01/04/2016 to 31/03/2017, duly highlighting the details of ex-gratia compensation payment made to each of the above assessee and the details of the amount of Tax deducted at source (IDS) and its payment to the credit of Government treasury and attached herewith. 2. The nature of payment made to ex-workers: The company has paid one time lump-sum-ex-gratia amount to its ex-workers, in lieu of payment till completion of his 63 years of his age. Since the above mentioned one time lump sum ex-gratia amount is deemed 'salary' paid to an Ex-employee in advance within the meaning of provisions of the Income tax Act, 1961, accordingly the company has deducted tax at source in accordance with the provisions of section 192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. K.C. Joshi vs. Union Of India and others reported in 163 ITR 597 (SC). 3.17. We find that the ld. CIT(A) did not heed to the detailed submissions made by the assessee before him and as well as before the ld. AO and simply upheld the order of the ld. AO by holding as under:- However in response to the notice u/s 133(6) sent by the Assessing Officer the Employer company stated the payment refers to one time lum-sum ex-gratia amount to its ex-worker, in lieu of payment till completion of his 63 years of his age. Vide Clause 4 of the Supplementary Agreement the Employer Company declared that the ex-gratia payment was towards full and final settlement with the ex-employee and no claim of the ex-worker would lie against the company towards any remuneration, compensation, ex-gratia and any other benefits. Hence the contention of the appellant that this payment has to be treated as advance salary since the same pertains to future years and allowed the relief under section 89(1) read with sub-rule (2) of Rule 21A of I.T. Rules is dismissed and restricting the relief u/s 89(1) to Rs 2,97,711/- is upheld. 4. We find that this issue is no longer res integra in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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, clearly indicates that the compensation received by the assessee is only salary received in advance not as termination compensation even though this was paid in lumpsum as ex-gratia in one go. 19. As brought to our notice by the counsel for the assessee the case of V.D. Talwar v. CIT (supra) the Hon'ble Supreme Court held as under: - Learned counsel for the appellant has then relied on Duff (H. M. Inspector of Taxes) v. Barlow [1942] 10 ITR (Suppl.) 157. That was also a case where the parties agreed that the arrangement arrived at between them should subsist up to 1945 though no exact percentage of the remuneration payable was fixed. The arrangement however was brought to an end prematurely in November 1937 and in consideration of his premature termination some remuneration was paid for services up to November, 1937 and a sum of pound 4,000 was paid as compensation for the loss of the employee's right to future remun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the possibility thereunder of escaping the charge to tax ; but, as I have said, we, have got to look at the substance of the matter, and the substance of this payment is this : It is contemplated as a part of the remuneration of the Director payable to him, and estimated according to his service during a certain time, and in addition to the amount paid to him under clause 104, there shall be estimated a sum which is to fall to be paid to him under clause 109. Lawrence L. J. said at page 632 : 'In my judgment, the determining factor in the present case is that the payment to the Respondent whatever the parties may have chosen to call it was a payment which the company had contracted to make to him as part of his remuneration for his services as a director. It is true that payment of this part of his remuneration was deferred until his death or retirement or cesser of office, and that in the articles it is called compensation for loss of office. It is, however, a sum agreed to be paid in consideration of the Respondent accepting and serving in the office of Director, and consequently is a sum paid byway of remuneration for his services as Director. It seems to us that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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