2014 (3) TMI 801 - AT - Income Tax

Tribunal restores exemption for voluntary retirement scheme from State Bank of India

The Tribunal set aside the orders of the Ld. CIT-26 and restored the AO's decision to allow exemption under section 10(10C) to the assessees who opted for ... Revision u/s 263 - Claim of exemption u/s 10(10C) of the Act – Compliance of provisions of Rule 2BA of the Rules - Assessee had taken Voluntary Retirement – Held that:- The decision in Pandya Vinodchandra Bhogilal vs. ITO [2010 (7) TMI 796 - ITAT AHMEDABAD] followed - claim for exemption u/s.10(10C) cannot be denied on the ground that the scheme of Voluntary retirement framed by the employer is not in accordance with the Rule 2BA – also in Dy. CIT v. Krishna Gopal Saha [2009 (7) TMI 173 - ITAT CALCUTTA-B] it was held that the assessee, who had exercised the option for retirement under the Scheme floated by the employer bank and had received the compensation from the employer bank, was entitled to exemption u/s.10(10C) even though the scheme was not in conformity with the requirement of Rule 2BA - the view taken by the AO while allowing the claim of the assessee for exemption u/s.10(10C) in the assessments framed u/s.143(3) was a possible view and the CIT was not justified in treating the assessments as erroneous and prejudicial to the interest of revenue – thus, the order of the CIT set aside – Decided in favour of Assessee. Issues:Three assessees claimed exemption under section 10(10C) of the Income-tax Act, 1961 after opting for Voluntary Retirement Scheme. The Ld. CIT-26, Mumbai set aside the assessment orders passed by the AO u/s.143(3) and directed to withdraw the exemption of Rs. 5 lakhs granted to the assessees u/s.10(10C) due to non-satisfaction of Rule 2BA of IT Rules. The assessees appealed before the Tribunal challenging the orders of the Ld. CIT-26.Analysis:1. Common Issue of Exemption under Section 10(10C):The three assessees, ex-employees of State Bank of India, claimed exemption under section 10(10C) after opting for Voluntary Retirement Scheme. The AO allowed the exemption initially based on a decision of the Bombay High Court in a similar case. However, the Ld. CIT-26 later set aside the assessment orders, citing non-compliance with Rule 2BA of IT Rules. The Tribunal analyzed various decisions and concluded that the AO's decision to allow the exemption was a possible view. The Tribunal disagreed with the Ld. CIT-26's interpretation of the Bombay High Court's decision in a different case involving SBI Exit Optees. The Tribunal noted that the High Court did not decide on the admissibility of the claim of the petitioners on merit, as acknowledged by the Ld. CIT-26 in the impugned order. Therefore, the Tribunal set aside the orders passed by the Ld. CIT-26 and restored the orders passed by the AO, allowing the appeals of the assessees.2. Interpretation of Bombay High Court Decision:The Ld. CIT-26 relied on a Bombay High Court decision involving SBI Exit Optees, where the High Court highlighted the requirement of Rule 2BA for availing benefits under section 10(10C). The High Court observed that the Staff Exit Scheme of SBI aimed at improving morale and not rightsizing, allowing the bank discretion to fill vacancies caused by officers' release under the exit option. The Ld. CIT-26 considered this decision favorable to the revenue, leading to the orders setting aside the exemption granted by the AO. However, the Tribunal found that the High Court did not decide on the admissibility of the claim of the petitioners on merit, which was crucial in the present case.3. Precedents and Tribunal Decisions:During the hearing, the Ld. Counsel for the assessees cited Tribunal decisions where similar issues regarding exemption u/s.10(10C) were decided in favor of the assessee. The Tribunal referred to cases like Pandya Vinodchandra Bhogilal vs. ITO and Dy. CIT v. Krishna Gopal Saha, where it was held that non-conformity with Rule 2BA does not invalidate the claim for exemption u/s.10(10C. These decisions supported the assessees' position that the AO's initial decision to allow the exemption was reasonable. The Tribunal considered these precedents and concluded that the Ld. CIT-26 erred in treating the assessments as erroneous and prejudicial to the revenue, ultimately allowing the appeals of the assessees.In conclusion, the Tribunal's detailed analysis of the issues surrounding the exemption under section 10(10C) highlighted the importance of considering precedents and the specific interpretations of relevant legal provisions in determining the validity of the claims made by the assessees in this case.