2006 (10) TMI 519

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...., 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 86, 87, 88, 89, 90, 91, 93, 94, 95, 96, 97, 98, 99, 100, 101, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 127, 129, 130, 131, 138, 139, 140, 141, 142, 143, 189, 190, 218, 220, 223, 258, 260, 262, 275, 288, 290, 292, 295, 298, 299, 300, 301 and 302 of 2006 COMMON JUDGMENT: (Per Hon'ble Sri Justice Bilal Nazki) These writ petitions and I.T.T.As. raise common questions of law and fact therefore, they have been heard together and are being disposed of by this common judgment. For appreciation of facts, we are taking the pleadings in Writ Petition No.4189 of 2006, as it is more comprehensive and in this case, the Circular of the Central Board of Direct Taxes in F.No.174/5/2001, dated 23.04.2001 has also been challenged. The petitioner in this case took voluntary retirement from Andhra Bank after putting in requisite number of years of service. Consequent to his retirement, he received a sum of Rs.11,14,241/- as ex-gratia. In the returns filed by him....

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....s that if an assessee receives in any financial year any payment which under Section 17 (3) is a profit in lieu of salary, then the relief to be granted under Section 89 can be in accordance with sub-rule (4) of Rule 21A. On the other hand, the respondents contended that Section 10 (10C) and Section 89 of the Act are no doubt two distinct and independent provisions, providing for meeting two different situations and they operate in different realms and are mutually exclusive. While Section 10 (10C) of the Act is an exclusive provision for granting relief to the employees receiving compensation in the context of Voluntary Retirement Scheme, Section 89 of the Act is a general provision granting relief to the employees receiving arrears or advance of salary, or profits in lieu of salary etc. It is further contended by respondents that Section 10 (10C) of the Act has been specifically brought on Statute books for the purpose of granting exemption to a specific limit in respect of compensation received at the time of voluntary retirement or termination in accordance with a scheme formulated by the employer. Section 10 (10C) of the Act is a self-contained provision and as such, the claim....

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....be prescribed: Provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year;]" Under Section 17(3) of the Act, "profits in lieu of salary" includes- (i) the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto; (ii) any payment (other than any payment referred to in clause (10) [,clause (10A)] [,clause (10B)], clause (11), [clause (12) [,clause (13)] or clause (13A)] of section 10), due to or received by an assessee from an employer or a former employer or from a provident or other fund, to the extent to which it does not consist of contributions by the assessee or [interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy; Explanation - For the purposes of this subclause, the expression "Keyman insurance policy" shall have the meaning assigned to it ....

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....s are terminated in accordance with a scheme and it also provides under second provision that where exemption has been allowed to an employee under the class for any assessment year, no exemption thereunder would be allowed to him relating to any other assessment year. Mr. S.R. Ashok further submits that from a bare perusal of these provisions of law, it becomes clear that once benefits have been taken under Section 10 (10C) of the Act under a voluntary retirement scheme, no further relief can be granted under Section 89 of the Act, and if benefits are taken under Section 10 (10C) of the Act, there is no question of having been paid any salary in arrears or in advance. Sections 89 and 10 of the Act operate in altogether two different fields and Section 10, as a matter of fact, grants relief in many many situations including a situation in which assesses retire under a voluntary retirement scheme. The learned counsel for petitioners however contend that what is required under Section 89 of the Act is that the amounts receivable should be either arrears or advance and if it is interpreted in terms of the definition to 'Profits in lieu of salary', then it would be quite clear that ....

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....to his resignation and not cessation of service in terms of a scheme formulated under Section 10 (10C) of the Act. Another judgment relief upon by the appellants is Ganti (V.R) v. Commissioner of Income-tax [216 ITR 48 (AP)] . This was also a case where employer paid to the assessee Rs.10,500/- being salary for four months as ex-gratia in addition to the terminal benefits. Therefore, admittedly, what the assessee received in this case was salary. Appellants also rely on Commissioner of Incometax v. M.Raman [245 ITR 856 (MADRAS)] . This is a very short judgment and does not lay down any precedent. Next judgment relied upon by the appellants is Y.S.C.Babu v. Chairman and Managing Director, Syndicate Bank [253 ITR 1 (AP)] . This judgment is relevant for the purpose of present case to the extent that the entire compensation/ex-gratia payable to the petitioner under the VRS was salary in terms of Section 17(3) of the Act, but this declaration was made in the context as to whether Deduction at Source could be made under Section 192 of the Act or not. Learned counsel for appellants also relied on judgments in (1) Commissioner of Income-tax v. G.V.Venugopal [273 ITR 307] , (2) ....

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....supra) has also directly considered this question. In this judgment, the Court, however, held that when there are two interpretations possible, one in favour of assessee must be accepted, to which, an exception has been taken by Mr.S.R.Ashok, Senior Advocate appearing for the other side. But without going to the question whether two interpretations are possible, we feel that where an employee has taken retirement under the Voluntary Retirement Scheme or is otherwise terminated from service, what he receives is compensation in lieu of service in terms of Section 17(3) of the Act and what has been barred by second proviso to Section 10(10C) of the Act is an exemption and not a relief. The relief under Section 89 of the Act is available to everybody and exemptions are available to the classes which have been mentioned in various provisions of the Act. In any case, Section 89 does not grant any exemption. The Kerala High Court stated - "The status of an employee whose service has been terminated by way of disciplinary proceedings cannot be on a higher pedestal than a person who took voluntary retirement. Compensation received by an employee by way of termination of service wou....