TaxTMI 
TaxTMI 
2022 (4) TMI 1179
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.... case has been selected for limited scrutiny and examine the issue "Relief u/s. 89". The relevant information as submitted by the assessee are, assessee has submitted Form 10E in support of his claim after relief u/s.89(1) along with the copy of Form -16 issued by employer M/s.Century Textiles and Industries Limited. The background of the issue is M/s.Century Textiles and Industries Limited was incurring heavy losses and shut down its Worli Textile Mill Unit in 2008. Around 6300 of its 6600 Mill workers opted for the voluntary retirement scheme, however, 275 workers had opposed for closure of the Mill. Assessee is one of the 275 employees who did not opt for voluntary retirement scheme declared by the company on 13.11.2006. The company in its application to the Labour Commissioner inter-alia offered to pay an ex-gratia amount of compensation to each of the 275 employees provided they accept the closure and termination of their services without agitating the issue or obstructing the development of the entire Mill land. The company offered to earmark a piece of land admeasuring 1.08 acres out of the total Mill land which would not be developed or otherwise dealt with till the entire ....
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....inue to be the absolute owner of the earmarked land. The Company also confirmed that the one time lump sum ex-gratia amount was towards full and final settlement and no claim would lie against any remuneration, compensation, ex-gratia or any other benefits. 5. In accordance with the Supplementary agreement dated 25/11/2016, the Company has computed the total dues payable by the Company to the assessee till he attains 63 years of age to be Rs..59,61,483/-. The company has paid the 'one time lump-sum ex-gratia amount' of Rs..42,66,844/- after deducting income tax of Rs..16,94,639/- as per the provisions of Section 192 of the Act. The Company in the said agreement has explained that the one time lump sum ex-gratia amount is deemed 'salary' paid to an exemployee in advance within the meaning of the provisions of the Act, it has therefore, deducted tax at source in accordance with the relevant provisions of the income tax act, 1961, as stated above. Form 16 has been duly issued to the assessee by the Company for the relevant F.Y 2016-17 certifying deduction of tax. In the return of income for the A.Y 2017-18, the assessee has claimed relief u/s.89(1) of the I.T.Act, 1961 on the compe....
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....h the relevant provisions of the income Tax Act, 1961. 9. Accordingly, a show-cause notice was issued to the assessee on 13.12.2019 asking him to explain why the amount received should not be treated as compensation on termination of employment. 10. In response assessee submissions as under: - "10. The assessee in his reply has claimed that vide supplementary agreement dated 25/11/2016, the employee agreed for lump sum ex-gratia amount of Rs. 42,66,844/-. The Company has computed the total dues payable by the Company to the assessee till he attains 63 years of age to be Rs. 59,61,483/-. The company has paid the 'one time lump-sum ex-gratia amount' of Rs. 42,66,844/- after deducting income tax of Rs. 16,94,639/- as per the provisions of Section 192 of the Income Tax Act, 1961. The Company in the said agreement has explained that the one time lump sum ex-gratia amount is deemed 'salary' paid to an exemployee in advance within the meaning of the provisions of the Income Tax Act, 1961, it has therefore, deducted tax at source in accordance with the relevant provisions of the Income tax Act, 1961. 10.1 According to the assessee, the amount is advance salary for t....
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.... full and final settlement with the ex-employee and no claim of the ex-worker would lie against the company towards any remuneration, compensation, ex-gratia and any other benefits. The services of the ex-workers stood terminated, effectively, as on 12/1/2008 with the closure of the Company. 14. In the circumstances, the ex-gratia payment received by the assessee is of the nature of compensation on termination of employment received from a former employer falling within the purview of clause (i) of Section 17(3) of the I.T.Act, 1961. Accordingly, relief u/s 89(1), in the case of the assessee is to be computed as per the provisions of Sub Rule (4) of Rule 21A and not under Sub-rule (2) of Rule 21A of the I.T.Rules, 1962 as computed by the assessee. Accordingly, the relief u/s 89(1) admissible in the case of the assessee is re-computed as Rs. 305397." 12. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) sustained the view of the Assessing Officer with the following observations: - "5.1 I have carefully considered the appellant submission and facts of the case. It is admitted fact that as per clause 4 of the supplementary agreement dated 2....
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....tail and submitted that the amount received by the assessee is whether it falls under salary received in advance or compensation for termination. He brought to our notice Page No. 27 to 736 of the Paper Book to submit that several other employees who also claimed the similar claim u/s. 89 of the Act and in those cases the revenue has accepted that the compensation received by the respective individual are in the form of salary received in advance. He submitted that the case of the assessee is exactly similar to the above cases and revenue cannot take different views on the exactly similar issue. Further he brought to our notice the agreement between the individuals and the company. In this regard he relied on the case law filed before Ld.CIT(A) and further relied on two case law which are reproduced below: - a) V.D. Talwar v. CIT [1963] 49 ITR 122 (SC). b) Patil Vijaykumar v. CIT in writ petition nos. 4916 to 4936 of 1984 dated 10.08.1984. He submitted that the above said case law are exactly similar to the facts of the assessee's case. 15. On the other hand, Ld. DR submitted that assessee is an ex-employee and received the compensation as ex-gratia as per t....
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....sation received by the assessee is only salary received in advance not as termination compensation even though this was paid in lumpsum as ex-gratia in one go. 19. As brought to our notice by the counsel for the assessee the case of V.D. Talwar v. CIT (supra) the Hon'ble Supreme Court held as under: - "Learned counsel for the appellant has then relied on Duff (H. M. Inspector of Taxes) v. Barlow [1942] 10 ITR (Suppl.) 157. That was also a case where the parties agreed that the arrangement arrived at between them should subsist up to 1945 though no exact percentage of the remuneration payable was fixed. The arrangement however was brought to an end prematurely in November 1937 and in consideration of his premature termination some remuneration was paid for services up to November, 1937 and a sum of pound 4,000 was paid as compensation for the loss of the employee's right to future remuneration under the earlier agreement of 1935. In these circumstances it was held that the sum of pound 94,000 was received by the respondent of that case not under the contract of employment nor as remuneration for services rendered or to be rendered but as compensation for giving u....