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TMI Blog2024 (10) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order passed by the Assessing Officer (hereinafter referred to as "AO") under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), dated 19/01/2021, wherein the AO made an addition of Rs. 15,50,905/- as "profits in lieu of salary" under Section 17(3) of the Act. 2. The assessee, an individual, was employed with You First Money Express Private Limited, which was subsequently acquired by Ebix Money Express Private Limited. Following this acquisition, the assessee's employment was terminated on 26th October 2017, and he received a severance compensation of Rs. 15,50,905/- which was claimed as a capital receipt not chargeable to tax in the return of income filed for AY 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 4. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s. 234A/B/C/D of the Act. 5. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in initiating penalty proceedings u/s. 270A of the Act. 6. The appellant craves leave to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as salary under Section 17(3) of the Act. 5.1. The AR placed on record the discharge letter from the employer, which clearly stated that the termination was due to redundancy following a business acquisition and not related to job performance. This, the AR argued, supports the contention that the compensation was for the loss of employment, and should be treated as a capital receipt. 5.2. The AR contended that even after insertion of section 56(2)(xi) of the Act with effect from 01-04-2019, the Pune Bench of the Tribunal has decided in favour of assessee in case of Ashok Raghunathrao Kulkarni Vs. ITO [2024] 165 taxmann.com 680. 5.3. The AR placed reliance on following judicial precedents: 1. Shamik Pankajbhai Parikh vs. ITO, Ward 5(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable to tax. 7.2. We have reviewed the judicial precedents relied on by the AR. These judicial precedents overwhelmingly support the assessee's case that the severance compensation of Rs. 15,50,905/- should be treated as a capital receipt, not taxable under Section 17(3) of the Act. Both the Gujarat High Court and various ITAT decisions have consistently held that voluntary severance payments made without contractual obligation are capital receipts and not subject to tax as profits in lieu of salary. In the present case the severance payment received by assessee was due to redundancy and job termination which should not be taxable as profits in lieu of salary under Section 17(3). The compensation was paid for the loss of employment, n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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