Tribunal Upholds Tax Exemption Claim of Rs. 5,00,000, Rejects Revenue Appeal; Liberal Interpretation Favored.

Deputy Commissioner Of Income-Tax, Circle-22, Calcutta. Versus Krishna Gopal Saha.

Deputy Commissioner Of Income-Tax, Circle-22, Calcutta. Versus Krishna Gopal Saha. - ITD 121, 368, TTJ 125, 577, Issues Involved:
1. Whether the CIT(A) erred in law in deleting the disallowance of the assessee's claim of exemption of Rs. 5,00,000 under Section 10(10C) of the IT Act.
2. Whether the scheme of voluntary retirement/voluntary separation was in accordance with the guidelines prescribed in Rule 2BA of the IT Rules.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Exemption under Section 10(10C):

The Revenue appealed against the CIT(A)'s order that allowed the assessee's claim for exemption of Rs. 5,00,000 under Section 10(10C) of the IT Act. The Revenue argued that the CIT(A) erred in law by deleting the disallowance based on the Hon'ble Madras High Court's decision in the case of CIT v. M. Chelladurai and Ors., which stated that no deduction under Section 10(10C) is available if the schemes are not in accordance with Rule 2BA of the IT Rules.

The Tribunal noted that the assessee received compensation under the Early Separation Plan (ESP) from Standard Chartered Bank and claimed a deduction under Section 10(10C). The employer had stated that the ESP scheme was not in conformity with Rule 2BA, leading the AO to disallow the exemption.

The CIT(A) had allowed the exemption based on various decisions of the Kolkata Benches of the Tribunal, which held that similar employees of the same bank were entitled to the exemption under Section 10(10C).

2. Conformity with Rule 2BA of the IT Rules:

The Revenue relied on the Madras High Court's decision in CIT v. M. Chelladurai and Ors., which emphasized that the schemes must comply with Rule 2BA to qualify for exemption under Section 10(10C). The Tribunal acknowledged that the issue involved a substantial question of law and noted that no other High Court decision on the impugned issue was brought to their notice.

The learned Authorised Representative for the assessee argued that the CIT(A)'s order should be confirmed, citing various jurisdictional Tribunal decisions where the Department had not filed appeals before the Hon'ble Calcutta High Court.

Analysis by the Tribunal:

The Tribunal reviewed the decision of the Hon'ble Madras High Court and found that the facts of the present case were similar. The Tribunal concluded that they were required to follow the judgment of the Hon'ble Madras High Court, which held that the assessee was not entitled to deduction under Section 10(10C) due to non-compliance with Rule 2BA.

Dissenting Opinion:

One of the members dissented, arguing that a catena of decisions had elaborated the issue in depth, and the Act should prevail over procedural rules. The dissenting member opined that the AO should have allowed reasonable opportunity for procedural lapses to be rectified and that the Act should not be made obsolete due to procedural issues.

Third Member Decision:

The matter was referred to a Third Member due to the difference of opinion. The Third Member, relying on the jurisdictional High Court's decision in SAIL DSP VR Employees Association 1998 v. Union of India, held that the provisions of Section 10(10C) should be interpreted liberally and beneficially for the employees opting for voluntary retirement. The Third Member agreed with the dissenting opinion and held that the assessee was entitled to exemption under Section 10(10C) to the extent of Rs. 5 lakhs.

Final Order:

As per the majority decision, the appeal of the Revenue was dismissed, and the assessee's claim for exemption under Section 10(10C) was upheld.