2006 (3) TMI 103 - HC - Income Tax

Court allows simultaneous tax benefits under sections 10(10C) and 89(1)

The court dismissed the Revenue's appeal challenging the denial of exemption under section 89(1) of the Income-tax Act to an assessee who had already ... Compensation received under the voluntary retirement scheme - case of the appellant-revenue is that the assessee/respondent herein, availed of the benefit of the voluntary retirement scheme and claimed exemption of the amount of compensation received, both under section 10(10C) and section 89(1) – held that there was no prohibition to the twin benefits in respect of the amount received under the voluntary retirement scheme. - Tribunal was right in holding that the assessee is eligible to claim simultaneous benefit under section 10(10C) as well as section 89(1) in respect of the compensation received under the voluntary retirement scheme Issues: Appeal against the denial of exemption under section 89(1) of the Income-tax Act after claiming exemption under section 10(10C) for compensation received under the voluntary retirement scheme.Analysis:The case involved an appeal by the Revenue against the order of the Income-tax Appellate Tribunal concerning the denial of exemption under section 89(1) of the Income-tax Act to an assessee who had already claimed exemption under section 10(10C) for compensation received under a voluntary retirement scheme for the assessment year 2001-02. The Assessing Officer had granted exemption under section 10(10C) but denied it under section 89(1) on the basis that once exemption under section 10(10C) is allowed, section 89(1) cannot be invoked. However, the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal allowed the appeal of the assessee, interpreting that where there is ambiguity, the benefit should be given to the taxpayer.The Revenue raised a substantial question of law challenging the eligibility of the assessee to claim simultaneous benefits under both section 10(10C) and section 89(1) for the compensation received under the voluntary retirement scheme. The court referred to a previous decision in CIT v. G.V. Venugopal [2005] 273 ITR 307, where it was held that there is no prohibition to claiming twin benefits in respect of the amount received under the voluntary retirement scheme. The court emphasized that every assessment year is a self-contained unit, and the relief under section 89(1) aims to mitigate hardship caused by high tax rates, which is applicable to compensation under the voluntary retirement scheme. The court concluded that since the assessee was covered by section 89, they were eligible to receive both benefits.Based on the settled proposition of law from the previous decision, the court found no merit in the Revenue's appeal and dismissed it. The court did not award any costs in this matter.