2021 (1) TMI 924 - HC - Income Tax

High Court grants exemption under Income Tax Act despite procedural error, emphasizing applicant's right to seek relief

The High Court allowed the writ applicant's claim for exemption under Section 10 (10 C) of the Income Tax Act, 1961, despite not initially claiming it in ... Deduction u/s 10 (10C) - applicant opted for Early Retirement Option (ERO), 2003 Scheme and received compensation - in the case of the writ applicant, he had not claimed such deduction - writ applicant was expected to prefer a revision application under Section 264 of the Act and not file a representation in that regard - HELD THAT:- We are of the view that, even if, the writ applicant had not claimed the exemption in his return of income for the year under consideration, he can always claim later in point of time. So far as the second ground on which the claim came to be rejected, Mr. Darshan Patel, invited the attention of this Court to the certain averments made in the Affidavit­in­ Rejoinder, writ applicant has tried to explain as above that it was an inadvertent mistake in labeling the application as a writ petition rather than a revision petition. We need not go into any further debate in this regard as the law has now been well settled by the Supreme Court in S. PALANIAPPAN VERSUS INCOME TAX OFFICER, CHENNAI [2015 (10) TMI 405 - SUPREME COURT] This writ application succeeds.Writ applicant is entitled to claim exemption under Section 10 (10 C) of the Act, 1961 for the amount received from the ICICI Bank Ltd. at the time of his voluntary retirement under the scheme, in accordance with law. Issues:1. Claim for exemption under Section 10 (10 C) of the Income Tax Act, 1961.2. Rejection of exemption claim by the Principal Commissioner.3. Filing of writ application under Article 226 of the Constitution of India.Issue 1: Claim for exemption under Section 10 (10 C) of the Income Tax Act, 1961:The writ applicant, a former employee of ICICI Bank Ltd., opted for early retirement under the Early Retirement Option (ERO), 2003 Scheme and received a sum of Rs. 15,69,701. He filed his income tax return without claiming the exemption under Section 10 (10 C) of the Act, 1961. Subsequently, he sought to claim this exemption based on a Supreme Court judgment in a similar case. The Supreme Court had allowed exemption for another ICICI Bank employee under Section 10 (10 C) in a comparable situation. The writ applicant's claim was initially rejected by the Principal Commissioner, leading to the filing of the present writ application.Issue 2: Rejection of exemption claim by the Principal Commissioner:The Principal Commissioner declined the exemption claim primarily on two grounds. First, it was noted that the writ applicant had not claimed the exemption in his original income tax return, unlike the successful appellant before the Supreme Court. Second, the Principal Commissioner suggested that the writ applicant should have filed a revision application under Section 264 of the Act instead of a representation. These reasons formed the basis of the rejection of the claim by the Principal Commissioner.Issue 3: Filing of writ application under Article 226 of the Constitution of India:The writ applicant approached the High Court through a writ application under Article 226 of the Constitution of India challenging the rejection of his exemption claim. The Court, after hearing arguments from both parties, held that the writ applicant could claim the exemption even if it was not initially mentioned in the income tax return. The Court also accepted the explanation provided by the writ applicant regarding the inadvertent labeling of the application as a writ petition instead of a revision petition. Consequently, the Court quashed the impugned orders rejecting the exemption claim and declared the writ applicant entitled to the exemption under Section 10 (10 C) for the amount received from ICICI Bank Ltd. during his voluntary retirement.This detailed analysis of the judgment showcases the legal intricacies involved in the case, including the interpretation of tax laws, the role of administrative authorities, and the recourse available to individuals through writ applications in seeking relief from adverse decisions.