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 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

Shri Manmohan Singh Bedi # 59, Phase III Urban Estate Patiala Vs. A.C.I.T. Patiala
July, 28th 2012
                 IN THE INCOME TAX APPELLATE TRIBUNAL
                   CHANDIGARH BENCH "B" CHANDIGARH

       BEFORE SHRI T.R. SOOD, AM AND Ms. SUSHMA CHOWLA, JM

                            ITA No. 507/Chd/2012
                          Assessment Year: 2007-08

Shri Manmohan Singh Bedi                V            A.C.I.T. Patiala
# 59, Phase III
Urban Estate
Patiala
PAN: ADGPB 1886 N
 (Appellant)                            (Respondent)

             Appellant by:        Shri K.P. Bajaj
             Respondent by:       Shri Akhilesh Gupta

             Date of hearing:               23.07.2012
             Date of Pronouncement:         26.07.2012





                                 ORDER

PER T.R. SOOD, A.M

      In this appeal the assessee has raised the following ground:

      "That on facts and circumstances of the case, the ld. CIT(A) was not
      justified in upholding the disallowance of exemption u/s 10(10C) of the
      Income-tax Act."

2.    The appeal has been filed late by 541 days. The assessee has filed an

application for condonation of delay which is duly supported by the affidavit.

The ld. counsel of the assessee referred to the application and pointed out that

originally the assessee has filed return declaring income of Rs. 13,10,521/- on

which total tax due including interest was Rs. 80,950/-. Later on this return was

revised declaring total income of Rs. 8,10,521/- after claming deduction u/s

10(10C) amounting to Rs. 5.00 lakhs and total tax remained only at Rs.

50,369/-.   However, the Assessing Officer did not allow the deduction u/s

10(10C) of the Act. Accordingly rectification application was moved for allowing

deduction u/s 10(10C).       The rectification application was rejected vide

Rectification order dated 16.2.2010 on which tax due was determined at Rs.

80,954/-. The assessee was advised not to file the appeal because total benefit

which the assessee could have received was less than Rs. 30,000/- and the

assessee was advised that after paying fee to the Tribunal and Advocate Fee
                                         2


nothing would be gained. Accordingly no appeal was filed. However, later on

the Assessing Officer passed another rectification order u/s 154 on 6.3.2012 in

which net tax payable was shown at Rs. 3,43,607/-.           When such a huge

demand was raised then the assessee was left with no option but to file appeal

before the Tribunal.     Therefore,   the appeal was filed late because of the

sufficient cause and the same may be condoned particularly in view of the fact

that the issue raised in appeal is covered in favour of the assessee.

3.       On the other hand, the ld. DR for the revenue submitted that once the

assessee had accepted the decision by not filing any appeal then later on the

same could not be made as reason for explaining the delay.

4.       We have heard the rival submissions carefully and we are satisfied that

the assessee had a sufficient cause for not filing the appeal in time.        The

assessee being an employee might have initially accepted the decision of the

Department because additional tax payable was only Rs. 30,000/- to avoid

litigation expenses.     However, the demand has been increased to Rs.

3,43,607/- vide Rectification order dated 6.3.2012 then the assessee was

forced to file the appeal. We are of the opinion that this is reasonable and

sufficient cause for filing the appeal late and accordingly      we condone the

delay.

5.       As far as the merits of the case are concerned, we find that the issue is

squarely covered in favour of the assessee by the order of the Tribunal in case

of Shri Bikran Jit Passi V DCIT dated 9.11.2011, ITA NO. 925/Chd/2011 A.Y

2008-09. In this case the Tribunal has held as under:-

       ""The present appeal filed by the assessee is directed against
     the order, dated 14.07.2011 of the ld. CIT(A) Panchkula passed
     u/s 250(6) of the Income-tax Act,1961 (in short hereinafter
     referred to as 'the Act')
     2.        The assessee has raised the following grounds of
     appeal :


         "1.     That the ld. CIT(A) has erred in law in upholding the
         withdrawal of exemption of Rs.5,00,000/- claimed under
                                         3


      Section    10(10C)    of     the   Act   which    is   arbitrary   and
      unjustified.

      2.     That the ld. CIT(A) has further erred in law as well
      as on facts in holding that the `Exit Option Scheme" does
      not satisfy the conditions laid under Section 10(10C) read
      with   rule    2BA   which    is   incorrect     and   as   such   the
      exemption withdrawn and upheld is wholly unwarranted.

      3.     That the order of the ld. CIT(A) is erroneous,
      arbitrary, opposed to law and facts of the case and is, thus
      untenable."

      3.     The facts of the case in brief are that the assessee
      Bikram Jit Passi filed return of income, on 11.08.2008 for the
      assessment year 2008-09. During the course of assessment
      proceedings, the AO noted that the assessee had claimed
      exemption u/s 10(10C) of the Act amounting to Rs.5,00,000/-.
      The AO disallowed the claim of the assessee's as not being
      eligible for exemption u/s 10(10C) of the Act.


      4.    The CIT(A) upheld the order of the AO.                 The relevant
      findings of the CIT(A) are as under :
      " Keeping in view the clear conditions in the scheme
      regarding filling up of vacancies caused by the release of
      officers and the confirmation by the Bank at point No.10
      above that the scheme does not comply with Section
      10(10C) of the IT Act and is not approved by Income Tax
      Department conditions No. (iii) & (iv) of Rule 2BA are
      violated. Therefore, the scheme is not eligible for
      exemption under Section 10(10C) of the IT Act,1961. As a
      result, the assessees are not held eligible for exemption u/s
      10(10C) of the Act."

5. We have heard both the parties and carefully perused and
considered the facts of the appeal. The ld. 'AR' placed reliance,
on the decision, in the case of Pandya Vinod Chandra Bhogilae V
ITO (2010) 045 DTR 105 ITAT, Ahmedabad, to state that the fact-
situation of the present appeal is squarely covered by the
decision. Having considered the decision, we found that the same
is applicable to the facts of the present cases. The relevant and
operative part of the decision is reproduced hereunder :

"2.        Thus the only issue involved in this appeal is about
           allowability of exemption under section 10(10C) of the
           Income Tax Act, 1961.

3. The facts of the case are that assessee is a Deputy
   Manager in SBI and has taken VRS on 31-5-2006 under exit
   option scheme introduced by the bank of India with effect
   from 7-5-2005. The assessee received salary and pension
   amounting   to  Rs.3,81,894   (including  exgratia).  On
   examination of Form No.16 the Assessing Officer noticed
   that assessee received exgratia of Rs.3,07,236 on VRS.
   He claimed exemption under section 10(10C) of the Act.
                              4


  The Assessing Officer disallowed the claim by following
  circular   No.    Chief   CIT,    Baroda    letter  BRD/Chief
  CIT/Tech/MICS/10(10C)/2009-10, dated 17-6-2006.           The
  assessee relied on the decision of Tribunal, Kolkata in the
  case of Dy.CIT v. Krishna Gopal Saha (2009) 29 DTR
  (Kol)(TM)(Trib) 385 but the learned Assessing Officer did
  not    agree    and   made     the  addition.    The  learned
  Commissioner (Appeals) also confirmed the disallowance by
  trying to distinguish the decision of Third Member in Dy.CIT
  v. Krishna Gopal Sahas case (supra).

4. We have heard the parties and perused the material on
   record. In our considered view the distinction cited by the
   learned Commissioner (Appeals) is not sound and does not
   stand to reason. The only basis for not allowing the claim
   has been that scheme for VRS is not in accordance with
   rule 2BA. However,, it has not been pointed out how the
   employer has not framed the scheme in accordance with
   rule 2BA. Earlier till 2002 schemes were required to be
   approved by the Chief Commissioner but thereafter such
   requirement has been dispensed with and, therefore, it is
   only for the employer to frame the scheme for VRS or for
   earlier exit option.  If Assessing Officer had any doubt
   about the scheme he could have enquired from the
   employer. So far as the assessee employee is concerned,
   he cannot be penalized and tax will be levied on him on the
   assumption that the scheme framed by employer is not in
   accordance with rule 2BA. In any case, the judgment of
   Third Member in Dy.CIT v. Krishna Gopal Saha (supra) is
   clearly applicable and we do not find any reason to take a
   different view. For the sake of convenience we refer to
   following para from the Third Member judgment in Dy.CIT v.
   Krishna Gopal Sahas case (supra) as under :

5. At the time of hearing before me, none appeared on behalf
   of the assessee-respondent. I have, therefore, heard the
   learned department Representative and perused the
   material placed before me. I find that the issue has been
   considered by the Hon'ble jurisdictional High Court in the
   case of SAIL DSP VR Employees Association 1998 v. Union
   of India (supra) in which their Lordships held as under :

         Section 10(10C) of the Income Tax Act, 1961, uses the
     expression any amount received by an employee.... At the
     time of his voluntary retirement in accordance with any
     scheme or schemes of voluntary retirement.... if a plain
     literal interpretation of statutory provision produced a
     manifestly absurd and unjust result, which the legislature
     could not have intended, the court is supposed to modify
     the language used by the legislature even to do some
     violence to it so as to achieve the obvious intention of the
     legislature and produce a rational construction.          An
     expression used in the statute is not always to be
     interpreted literally or grammatically. Sometimes it has to
     be interpreted having regard to the context in which the
     expression is used and having regard to the object and
     purpose for which the same is enacted. Sec.10(10C) was
     inserted in order to make voluntary retirement attractive so
     as to reduce human complements for securing economic
     viability of certain companies. This object was elaborated
                         5





by   various   departmental     circulars    and  explanatory
statements issued from time to time. Similarly, rule 2BA of
the Income Tax Rules, 1962, which was inserted by IT
(Sixteenth Amendment) Rules, 1962, was amended from
time to time. All these go to show that this was intended to
make voluntary retirement more attractive and beneficial to
the employee opting for voluntary retirement. Therefore,
this has to be interpreted in a manner beneficial to the
optee for voluntary retirement, if there is any ambiguity.

   Sums paid on voluntary retirement to the extent of
rupees five lakhs are exempted from being charged to tax
by reason of section 10(10C).    Even if the payment is
stretched over a period of years, the same would not
become chargeable to tax in any subsequent assessment
year.

   From the above it is evident that their Lordships of the
jurisdictional High Court held that an employee, who takes
voluntary retirement, is entitled to deduction under section
10(10C) even if the payment is stretched over a period of
years.     They have also held that provision of section
10(10C) should be interpreted in a manner beneficial to the
optee for voluntary retirement. It may be pointed out that in
the above-mentioned case, the employer i.e. SAIL was of
the opinion that the employees were not entitled to
exemption under section 10(10C) and accordingly, SAIL had
been deducting tax at source on the amount paid under
their voluntary retirement scheme. The facts are similar in
the assesses case, because in the case of the assessee
also, the employer believing that the assessee is not
entitled to deduction under section 10(10C) has deducted
tax at source on the amount paid on voluntary retirement.
The facts being identical, the above decision of Hon'ble
jurisdictional High Court would be squarely applicable to
the case under appeal before the Tribunal.

6.       Similarly, Hon'ble Bombay High Court in the case
of CIT v. Nagesh Devidas Kulkarni (supra) held as under :

   The assessee is entitled to the exemption under section
10(10C) of the Act and also rebate under section 89 of the
Act in respect of the amount received in excess of
Rs.5,00,000 on account of voluntary retirement.

   Thus their Lordships have held that the assessee, who
opts for voluntary retirement, is not only entitled to
exemption under section 10(10C) but also rebate under
section 89 of the Income Tax Act. Similar view is taken by
the Hon'ble Karnataka High Court in the case of CIT v. P.
Surendra Prabhu (supra) wherein their Lordships held as
under :

   That the assessee, employee of the respondent bank
was not only entitled to the benefit of exemption under
section 10(10C) of the Act to the extent prescribed in the
provision itself but for any amount over and above the
prescribed limit; under the aforesaid provision, the
assessee was also entitled to relief under section 89(1) of
the Act read with rule 21A.
                                        6


     6.     From the above it is evident that while the learned AM
          relied upon the decision of Hon'ble Madras High Court in
          the case of CIT v. M.Chelladurai & Ors. (2009) 317 ITR
          370(Mad) : (2009) 176 Taxman 31, he has not taken into
          account the decisions of other High Courts including the
          jurisdictional High Court. The Hon'ble jurisdictional High
          Court under the identical facts held the assessee, i.e., the
          retired employee, to be entitled to deduction under section
          10(10C). Similar view is taken by Hon'ble Bombay as well
          as Karnataka High Courts.          The decision of Hon'ble
          jurisdictional High Court is binding upon us and moreover if
          two views are possible, while interpreting the provision, a
          view which is favourable to the assessee has to be
          adopted.     Hon'ble jurisdictional High Court in the above-
          referred case of SAIL DSP VR Employees Association 1998
          v. Union of India (supra) has also held that the provisions
          of section 10(10C) are to be interpreted liberally in a
          manner which is beneficial to retired employees in view of
          the above. I respectfully following the decisions of Hon'ble
          jurisdictional High Court, Bombay High Court and Karnataka
          High Court agree with the learned JM and hold that the
          assessee is entitled to exemption under section 10(10C) to
          the extent of Rs.5 lakhs."

          Respectfully following the above decision of the Tribunal,
          we allow the claim of assessee."
      6.    The issue in question is covered by the decision of the
      Hon'ble     Tribunal,     as    reproduced      above.    The
      assessee/appellant was also employed in the State Bank of
      India. Respectfully following the said decision, the appeal is
      decided in favour of the assessee."

6.    Following the above decision we decide the issue in favour of   the

assessee.

7.    In the result, appeal filed by the assessee is allowed.

                    Order pronounced on 26 .07. 2012



          Sd/-                                               Sd/-
     (SUSHMA CHOWLA)                                      (T.R. SOOD)
     JUDICIAL MEMBER                                  ACCOUNTANT MEMBER

Dated: 26.07.2012

SURESH

Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/ The DR
7
 
 
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