2006 (5) TMI 313

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....ent under the Voluntary Retirement Scheme (VRS) offered by the employer. The VRS was offered under a Special Scheme of VRS framed in accordance with the guidelines prescribed and approved by the Competent Authority. The assessees received amount under the special VRS package over and above the regular retirement benefits. The assessees claimed exemption under section 10(10C) of the Income-tax Act, 1961 on the said VRS amount. The assessee claimed, on taxable portion of the component, relief in the return of income under section 89(1). The Assessing Officer declined the relief under section 89(1) of the Act to the assessees on the following grounds : "(a)that rule 21A does not envisage compensation received on voluntary retirement but only ....

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....ived by the employee at the time of voluntary retirement would be regarded as salary and relief under section 89(1) of the Act would be admissible in respect of the amount received by the employee from his employer at the time of voluntary retirement and, therefore, there is no question of treating this amount as not being covered under section 89(1) read with section 17(3) of the Income-tax Act, 1961. 3.2 The second issue before the CIT(A) was whether limit imposed by the proviso to section 10(10C), the assessee was not entitled to any relief under section 89(1). On this issue, the CIT(A) held that in view of the Board's Circular No. 667, it is clear that section 89(1) of the Act cannot be confused with section 10(10C), as both these prov....

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....as right in holding that the voluntary retirement from service would fall under the term "termination of employment" within the meaning of section 17(3) of the Income-tax Act, 1961, and that the relief under section 89(1) is admissible in respect of the amount received by the assessee-employee from the employer at the time of voluntary retirement. This issue was decided by the Hon'ble Madras High Court in favour of the assessee. Again, the Hon'ble Madras High Court in the case of CIT v. G.V. Venugopal [2005] 273 ITR 307 had to consider the following questions :- "On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in granting relief to the assessee under section 10(10C)(viii), as the amount exceeding....