Voluntary retirement compensation on closure of an undertaking qualifies for tax exemption under section 10(10B).

Voluntary retirement compensation paid under a Government-approved scheme on closure of the HMT Tractor Division was treated as compensation linked to closure of an undertaking, not as ordinary retirement consideration. The Tribunal relied on its earlier coordinate bench rulings on identical facts and the Madras High Court's reasoning that the scheme's object was rehabilitation of employees displaced by closure. On that basis, the receipt fell within section 10(10B) of the Income-tax Act, 1961, and was exempt from tax. Full relief was therefore available to the assessee on the amount received.

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Issues: Whether the voluntary retirement compensation received on closure of the HMT Tractor Division was exempt under section 10(10B) of the Income-tax Act, 1961.

Analysis: The compensation was paid under a Government-approved scheme linked to closure of the Tractor Division and budgetary support for clearing employee dues, with employees not opting for the scheme liable to retrenchment. The Tribunal followed its earlier coordinate bench decisions on identical facts and the reasoning adopted in the Madras High Court decision treating such receipts as compensation on closure and not as ordinary voluntary retirement consideration. The scheme's object was rehabilitation of employees on closure of the undertaking, bringing the receipt within the scope of section 10(10B).

Conclusion: The receipt was held exempt under section 10(10B), and the assessee was entitled to full relief on the amount received.

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