TaxTMI 
TaxTMI 
2012 (9) TMI 19
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...., 2010 allowing exemption under Section 10(10C) is final and binding. In the alternative, the petitioner has sought an order directing the officers to allow exemption under Section 10(10C) of the Act. 3)(A) The State Bank of India propounded a "Staff Supervising Exit Option Scheme" dated 29th April, 2005. The object of the scheme was to reduce the staff strength by providing a exit route to eligible officers from Top Executive Grade Special Scale to Officers of Middle Management Grade Scale-III. Clause 10 of the scheme reads as under: "10 INCOME TAX -TDS As the proposed scheme does not comply with Rule 10(10C) of Income Tax Act 1961 and no benefit of exemption of ex-gratia from income tax is intended in this scheme, there is no legal requirement for obtaining prior approval of Income Tax Department." B) On 31st August, 2006 the State Bank of India propounded a "Staff Award Exist Option Scheme". The object of the scheme was to provide an exit route to the employees in workmen category who felt frustrated and demotivated due to lack of carrier prospects. Clause 8 of the Scheme reads as under: "8 Income Tax- In terms of Section 35DDA [37(i)] of the Income Tax Act the payments to....
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....rd October, 2009." 7) Mr. Mistri, the learned Senior Counsel appearing on behalf of the petitioner, submitted that by this circular the first respondent directed the concerned authorities to proceed on the basis that the employees of the State Bank of India who had availed the benefit of the said scheme would not be eligible for deduction under Section 10(10C). Mr. Pinto, the learned Counsel appearing on behalf of the respondents denied the same. He inter alia submitted that the circular merely advised the concerned authorities to decide the issue in accordance with law. 8) We could normally have disposed of the petition on the basis of the statement on behalf of the respondents. However, considering the manner in which the matters have proceeded in relation to the assessment proceedings of hundreds employees of State Bank of India, it is necessary to state a few facts. Moreover, it is apparent that some authorities including the Assessing officer construed the circular as a mandatory order requiring them to deny the benefit of Section 10(10C). 9(A) For instance, by an order dated 24th March, 2010 in respect of one such officer the Commissioner of Income Tax inter alia observed ....
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....f the proceedings have not been furnished. The same is however, evident from an order of the CIT under Section 264 dated 13th September, 2010 directing the Assessing officer to process the return in accordance with law. The details of the proceedings have not been furnished. The same is however, also evident from a letter dated 11th November 2010 addressed by the Income Tax officer in which it is stated that the Assessing officer had been issued instructions for processing the return and allowing the exemption under Section 10(10C). 10) It is equally important to note that the officers in various States including Maharashtra gave the benefit of the exemption to various other officers who had opted for the said scheme. Eight such orders have been annexed to the petition. The claim for exemption was considered on merits and held in favour of the assessee. 11) It appears that thereafter, some officers of the Department continued to proceed on the basis of the impugned circular. In view thereof, the petitioner by a letter dated 27th October, 2010 called upon the 1st respondent to withdraw the impugned circular and to issue a fresh circular allowing exemption under Section 10(10C) to ....
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....to decide the question of eligibility under Section 10(10C) in accordance with law namely the provisions of the Act, the rules made thereunder and all other legal principles including the doctrine of precedent. We are of the opinion that the statements are correctly made. The circular does not prohibit the authorities from discharging their functions under the Act. It appears that some officers have wrongly considered themselves bound by the circular to the extent of their being required to reject the application under Section 10(10C) merely on the basis thereof and without considering whether in law the assessees are entitled to exemption in view of their having opted for the scheme. 16) We also agree with Mr. Pinto that in the facts and circumstances of this case, it is not proper for this Court to decide the question of eligibility on merits and that the same ought to be considered by the appropriate authorities in accordance with law. In view thereof, we do not intend considering prayers (b), (c), (d) and (f). All the contentions of the petitioners, its members and other similarly placed assessees are kept open. 17) Mr. Mistri invited our attention to the Judgment of the Divi....