TaxTMI 
TaxTMI 
2008 (7) TMI 259
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.... and in the circumstances of the case and in law, the Tribunal has justified in allowing relief to the assessee under section 89(1) of the Act in respect of sum received under the VRS over and above a sum of Rs.5,00,000 which is not prescribed under section 89 (1) of the Income-tax Act nor under any of the prescribed categories as per Rule 2BA of Income Tax Rules, 1962. (d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in allowing relief to the assessee under section 89(1) of the Act when employer has not determined the amount of ex gratia and financial years to which it pertained." 2. Appeal admitted on the question of law as formulated above. 3. On behalf of Revenue it is sought to be submitted that the employees who had taken benefit of the scheme framed by R.B.I. are not entitled to the benefits under section 10(10C) of the Income Tax Act, Considering Rule 2BA of the Income Tax Rules. It is further submitted that the Assessing Officer took note of the Central Board of Direct Taxes Instructions dated 26th September/October, 2005 wherein Central Board of Direct Taxes has stated that the "Optional Early Retirement Scheme"....
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....erned with Rule 2BA. The relevant portion of the Rule reads as under:- "2BA......at the time of his voluntary retirement or voluntary separation shall be exempt under clause (10C) of Section 10 only if the scheme of voluntary retirement framed by the aforesaid company or authority or Co-operative Society or University or Institute, as the case may be: (i) it applies to an employee who has completed 10 years of service or completed 40 years of age; (ii) it applies to all employees (by whatever name called) including workers and executives of a company or of an authority or of a co-operative society, as the case may be, excepting directors of a company or of a co-operative society; (iii) the scheme of voluntary retirement or voluntary separation has been drawn to result in overall reduction in the existing strength of the employees; (iv) the vacancy caused by the voluntary retirement or voluntary separation is not to be filled up; (v) the retiring employee of a company shall not be employed in another company or concern belonging to the same management; (vi) the amount receivable on account of voluntary retirement or voluntary separation of the employee does not exc....
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.... was pleased to hold that they do not agree with the stand of Assessing Officer and the Commissioner of Income-tax that the conditions of the guidelines prescribed under Rule 2BA are not complied with in the O.E.R.S. of the R.B.I. For the aforesaid reasons they allowed the Appeals. 10. Before answering the issue we may refer to some of the material which have been brought to our attention by the parties under the scheme as announced by Administrative Circular No.1 dated August 11, 2003 was applicable only those employees were eligible who have completed 25 years of full time regular service in the bank and have also completed 50 years of age as on 1^st August, 2003. The ex gratia payment was equal to pay plus D.A. for the number of years of actual service rendered at 60 days for each completed year of service or part thereof in excess of six months or pay plus D.A. for remaining months of service reckoned upto the date on which the employee would retire on superannuation whichever is less. In the annual report for the year ending June 30, 2004 reference is made to the Optional Early Retirement Scheme, the relevant portion of which reads as under:- "Technological upgradation u....
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....rs 28^1 10^1 2^1 9 7 2. Class III 7^2 3 3 1 Nil 3. Subordinate Staff 71^3 49 10 0 12 106 62 15 10 19 1. Includes 2 Part time BMOs (1 Gen. & 1 SC). 2. Out of 7 appointments, 5 were made on compassionate grounds. 3. Out of 71 appointments, 19 were made on compassionate grounds. 12. To a further query under R.T.I. in respect of communication dated May 16, 2008 it was again reiterated that the Bank has not made any recruitment against the vacancies caused by OERS. 13. Before introducing the scheme a note had been prepared by the Department of Administration and Personal Management which shows that as a result of closure of Note Examination Section and also on account of downsizing/reduction of staff in other areas due to computerization, mechanisation, simplification of processes and decentralisation, a sizeable number of employees in all classes are being/will be rendered surplus. This problem was faced by all the offices. While some other measures were being considered to tackle the problem of surpluses by redeployment, no easy and quick solution could be worked out to....
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....sion or its fall-out and not its true object. It is similar to the incentive given to the tax-payers to invest in the public sector bonds by non-inclusion of the interest earned thereon in the taxpayer's total income which promotes the true object of raising the resources of the public sector for its growth and modernisation. The real distinction between the true object of an enactment and the effect thereof, even though appearing to be blurred at times, has to be borne in mind, particularly in a situation like this. With this perspective, keeping in view the true object of the impugned enactment, there is no doubt that employees of the private sector who are left out of the ambit of the impugned provision do not fall in the same class as employees of the public sector and the benefit of the fall out of the provision being available only to the public sector employees cannot be rendered the classification invalid or arbitrary. This classification cannot, therefore, be faulted." 15. It will, therefore, be clear that judicial notice was taken by the Supreme Court that the very object in enacting the provisions was to down size the employees strength so that unwanted personnel coul....
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..... This meets the second requirement. The third requirement is that the Scheme has been drawn to result in overall reduction in the existing strength of the employees. This has not been expressly stated in the scheme. However, we have noted the object behind the Section 10(10C) and the note put up before the Governor at the time when the scheme was framed. The material on record would indicate that the employees had been rendered surplus on account of various steps taken by the employer. The scheme, therefore, was meant for an overall reduction in the existing strength of the employees. The third requirement is also, therefore, satisfied. The fourth requirement was the vacancy caused by the voluntary retirement or voluntary separation is not to be filled up. We may firstly note that a finding of fact has been recorded by the Tribunal on that count which is not challenged before us in terms of the questions of law as framed by the revenue. Secondly there was material on record which shows that the scheme basically was to reduce the employee strength as posts had become surplus on account of reorganisation. One cannot fill in the posts which have become surplus as the post....
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....ed by the Apex Court in UCO Bank vs. Commissioner of Income-tax, [1999] 237 ITR 889 as also in Commissioner of Sales Tax vs. Indra Industries, [2001] 248 ITR 338(SC). The Court, therefore, is not precluded to consider the issue irrespective of the Central Board of Direct Taxes Circular. On examination of the issue it would be clear that the guidelines have to be read in conformity with the statutory provisions. On the facts in the instant case, the Tribunal has recorded a finding that the predicates of the Rule have been satisfied. The Supreme Court in Commissioner of Income Tax vs. Gwalior Rayon Silk Mill Manufacturing Co. Ltd. [1992] 196 ITR 149(SC) has observed as follows (page 156): "Logic alone will not be determinative of a controversy arising from a taxing statute. Equally, common sense is a stranger and an incompatible partner to the Income-tax Act. It does not concern itself with the principles of morality or ethics. It is concerned with the very limited question as to whether the amount brought to tax constitutes the income of the assessee. It is equally settled law that if the language is plain and unambiguous, one can only look fairly at the language used....