TaxTMI 
TaxTMI 
2016 (9) TMI 1148
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....x Act, 1961 which was righty allowed by the Assessing Officer in his order dated 16.10.2008 passed under sec. 143(3) of the Income-tax Act, 1961. 2. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon. 3. The facts in brief are that the assessee-appellant during the year under consideration was having salary income being head of account in Cambridge Primary School, New Delhi run by a society for the advancement of education. The assessee had received gratuity, leave encashment and compensation as well due to compulsory early retirement. The assessment was framed under sec. 143(3) of the Income-tax Act, 1961 and the returned income was accepted. The Learned CIT invoking the provisions of sec. 263 of the Act issued notice there under and being not satisfied with the cause shown by the assessee held the assessment order as erroneous and prejudicial to the interest of Revenue. The Learned CIT set aside the assessment order with the direction to the Assessing Officer to revise the order by disallowing the claim of deduction amounting to Rs. 5 lacs allowed under sec. 10(10C....
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....hool regarding the settlement scheme for grant of compensation, the assessee was told that the TDS had to be deducted by them as per rules and the assessee should apply for a refund as the amount was under a mutually agreed VRS settlement. 4.1 The Learned AR submitted further that the assessee had submitted all the necessary information and documents whatever asked by the Assessing Officer during the course of assessment proceedings for the assessment year 2007-08. Being fully satisfied about the facts of the case, the Assessing Officer framed assessment under sec. 143(3) of the Act on 16.10.2008 by accepting the return of income filed by the assessee besides making addition on account of saving bank interest. The Assessing Officer also issued the refund as the assessee was assessed as per the said assessment order. The Learned AR contended merely because the Learned CIT is having different opinion on a particular income/exemption cannot be a basis for invocation of the provisions laid down under sec. 263 of the Act for the revision of the assessment order. It is not the case of the Learned CIT that assessee had concealed any material facts of the case from the Assessing Officer....
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....s by the Learned AR, we find that in the case of Arun Bhai R. Naik Vs. ITO (supra) almost similar facts were there as in the case of assessee before us. The question raised before the Hon'ble High Court was as to "whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that the amount of Rs. 3,51,308 received by the appellant in accordance with the High Court's judgment was income liable to tax under sec. 17(3) of the Income-tax Act, 1961?". 6.1 In the above case before the Hon'ble Gujarat High Court, the Assessing Officer noted that assessee had received an amount of Rs. 3,51,308 being ex gratia compensation on premature cessation of his services. In the foot note of the return of income, the assessee has stated that since neither the terms of employment nor the service rules of the company provide for making ex gratia payment, this claim as capital receipt is not liable to tax as the same is not paid as retrenchment compensation either under labour laws or under the terms of the employment. The matter ultimately reached to the Hon'ble High Court and the Hon'ble High Court after discussing the issue in detail has decided t....
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....n question came to be paid to the appellant. 11. Thus, the assessee's services came to be terminated by the order dated 6th May, 1984 under rule 44 of the relevant Service Rules after giving three months' pay. Therefore, insofar as the obligation of the employer to pay any amount to the assessee in relation to the termination of his services, the same came to an end in view of the discharge of his services under rule 44. While the assessee succeeded in the writ petition filed by him, the letters patent appeal preferred by the employer came to be allowed. Therefore, the discharge of the assessee's services by the employer attained finality. However, during the pendency of the letters patent appeal, the assessee and the employer arrived at a settlement, in terms whereof, the amount was to be computed in the manner stated therein and was to be paid to the assessee. Therefore, the services of the assessee came to be terminated in terms of the rules, and the amount in question was paid only in terms of the settlement, without there being any obligation on the part of the employer to pay any further amount to the assessee in terms of the service rules. The employer, voluntarily ....
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.... to be received as "compensation", the employee would have a right to receive such payment. If the employee has no right, it cannot be treated as "compensation". The court held that it is for this reason that if the payment is made ex-gratia or voluntarily by an employer out of his own sweet will and not conditioned by any legal beautify or legal obligation, whether on sympathetic reasons or otherwise, such payment is not to be treated as "profit in lieu of salary" under clause (i). 6.2 The ratio laid down by the Hon'ble Delhi High Court in the case of CIT vs. Sarda Sinha (supra) is also helpful to the assessee in the present case. In that case, before the Hon'ble High Court, the question raised was "whether the ITAT was correct in law in holding that the compensation of Rs. 53,82,000 received by the assessee from the German Publisher was a capital receipt not chargeable to tax under Income-tax Act, 1961?" The Hon'ble Court concur with the conclusion of the Learned CIT(Appeals) that the sum paid to the assessee was "to compensate for the abrupt loss of source of income" and that the termination of contract had fatally injured the appellant's only source of income for ....