Ex Gratia Amount in Voluntary Retirement Eligible for Tax Exemption

The appeal filed by the assessee, a former employee of State Bank of India, regarding the exemption claimed under section 10(10C) of the Income Tax Act for an ex gratia amount received upon voluntary retirement, was allowed. The Tribunal ruled in favor of the assessee, stating that the ex gratia amount of Rs. 5 lakhs is eligible for exemption under section 10(10C) of the Act, despite non-compliance with Rule 2B of the Income Tax Rules.

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Issues involved:
The appeal is regarding the exemption claimed by the assessee u/s 10(10C) of the Income Tax Act, 1961 for an ex gratia amount received upon voluntary retirement.

Summary:

Issue 1: Exemption u/s 10(10C) of the Act
The assessee, a former employee of State Bank of India, received an ex gratia payment of Rs. 5 lakhs upon voluntary retirement. The Assessing Officer disallowed the exemption claimed u/s 10(10C) citing non-compliance with Rule 2B of Income Tax Rules, 1962. The assessee's appeal before the CIT(A) was rejected, leading to the current appeal. The Tribunal noted a similar case where the High Court ruled in favor of the employee's entitlement to exemption u/s 10(10C) even if the payment is spread over years. Relying on this precedent, the Tribunal allowed the assessee's appeal, stating that the ex gratia amount was eligible for exemption u/s 10(10C) of the Act.

Decision:
The appeal filed by the assessee is allowed, and the compensation amount of Rs. 5 lakhs is deemed eligible for exemption u/s 10(10C) of the Act.

Note:
Separate judgment was not delivered by the judges.

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