2014 (8) TMI 3

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....orkmen. The scheme inter alia provided for payment of Rs. 2.5 lakhs for an employee, who has completed 10 to 15 years of service and Rs. 2.65 lakhs for an employee, who has completed 16 to 20 years of service. With similar progression, the last category is the one, of employees, who completed the service of 31 years and above and the compensation provided for is Rs. 3.25 lakhs. The grievance of the petitioners is that though under Section 10(10C) of the Income Tax Act, 1961 (for short the Act) VRS benefits to the extent of Rs. 5,00,000/- is exempted, the 3rd respondent i.e., employer has effected deductions of substantial amounts, at source. They contend that the action taken by the 3rd respondent is contrary to the provisions of the Act, t....

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....t provided inter alia for exemption of levy of income tax on the amounts received by an employee of a company, under VRS, subject to the ceiling of Rs. 5,00,000/- To discourage introduction of indiscriminate schemes, which ultimately may serve the cross purposes, the Government introduced Rule 2BA in the Rules, prescribing certain Guidelines. The provision reads: 2BA. The amount received by an employee of- (i)  a public sector company; or (ii) any other company; or (iii) an authority established under a Central, State or Provincial Act; or (iv) a local authority. At the time of his voluntary retirement shall be exempt under clause (10C) of section 10 only if the scheme of voluntary retirement framed by the aforesai....

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....nt effected deduction of tax at source on the basis of working out a formula referred to Clause (vi) of Rule 2BA of the Rules. They proceeded on the assumption that the amounts stipulated under that Clause viz., one and half months salary for each completed year of service or the monthly salary multiplied by the balance of months of service left before the date of retirement on superannuation alone is exempted. The amount so arrived at was treated as qualified for the benefit under Section 10(10C) of the Act and the rest of the amount was subjected to TDS, though the aggregate was below Rs. 5,00,000/-. The approach of the 3rd respondent is contrary to the relevant provisions of the Act and the Rules made thereunder. Rule 2BA of the Rules....