2009 (10) TMI 498 - SC - Income Tax

Retired central bank employees entitled to exemption under Section 10(10C), deductions restored after government concession

SC allowed the appeals, holding that retired employees of the central bank are entitled to exemption under section 10(10C) of the Income-tax Act. The ... Voluntary retirement scheme - exemption u/s 10(10C) - HELD THAT:- It was brought to our notice that by the subsequent letter dated 8-5-2009, issued by the Central Board of Direct Taxes, it was indicated that the matter had been reviewed on the basis of the judgment of the Bombay High Court in the case of Koodathil Kallyatan Ambujakshan [2008 (7) TMI 259 - BOMBAY HIGH COURT] and it was held that amounts received by retiring employees of the RBI would be eligible for exemption under the aforesaid provisions of the Income-tax Act. On behalf of the Union of India and the Commissioner of Income-tax, the respondent herein, it was submitted that in view of the said circular, the respondent would allow the benefit of deduction to the appellants under section 10(10C) of the Income-tax Act, 1961, as far as the retired employees of the Reserve Bank of India are concerned. Thus, the appeals succeed and are allowed. The impugned order passed by the High Court is set aside and that of the Tribunal is restored. Issues:Deduction under section 10(10C) of the Income-tax Act, 1961 for employees of the Reserve Bank of India opting for Optional Early Retirement Scheme.Analysis:Issue 1: Deduction under section 10(10C) of the Income-tax Act, 1961The appeals were filed against the Madras High Court's order regarding the deduction available to the appellants under section 10(10C) of the Income-tax Act, 1961. The Commissioner (Appeals)-IV, Chennai's order for the assessment year 2004-05 was challenged before the Income-tax Appellate Tribunal, Chennai Bench, which upheld the claim for deduction made by the appellants. The High Court held that the amount received by employees of the RBI opting for the Optional Early Retirement Scheme did not qualify for deduction under section 10(10C) of the Income-tax Act based on a letter from the Central Board of Direct Taxes. However, a subsequent letter dated 8-5-2009 from the Central Board of Direct Taxes, after reviewing the judgment of the Bombay High Court, clarified that amounts received by retiring employees of the RBI would be eligible for exemption under the Income-tax Act.Issue 2: Impact of subsequent circular on the caseThe subsequent circular issued by the Central Board of Direct Taxes, based on the Bombay High Court's judgment, indicated that the retiring employees of the Reserve Bank of India would be eligible for the exemption under section 10(10C) of the Income-tax Act. In light of this circular, it was submitted on behalf of the Union of India and the Commissioner of Income-tax that the appellants would be allowed the benefit of deduction under section 10(10C) of the Income-tax Act concerning the retired employees of the Reserve Bank of India.Judgment:Considering the subsequent circular and the clarification provided by the Central Board of Direct Taxes, the Supreme Court allowed the appeals. The impugned order of the High Court was set aside, and the order of the Tribunal, which upheld the claim for deduction made by the appellants, was restored. The Court ruled in favor of the appellants, allowing the benefit of deduction under section 10(10C) of the Income-tax Act for the retired employees of the Reserve Bank of India. No costs were awarded in this matter.