TaxTMI 
TaxTMI 
2009 (6) TMI 65
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....oyee of Bharat Aluminium Company Ltd. (Balco), Korba. He filed return of income for the assessment year 2003-04 declaring taxable income of Rs. 3,22,315. Subsequently, he revised the taxable income at Rs. 98,800. The Assessing Officer selected his case for scrutiny and issued notice under section 143(2) of the Act. During the assessment proceeding it was noticed that the employer of the respondent had determined the ex gratia amount of voluntary retirement at Rs. 7,13,513 and out of this amount only 1/5th, i.e., Rs. 1,42,703, was actually paid to the respondent in the assessment year and the balance amount was to be paid in four instalments in the next financial years. The assessee, however, claimed deduction for a total sum of Rs. 5,00,000, maximum limit for exemption as per section 10(10C) of the Act. The Assessing Officer allowed exemption of Rs. 1,42,703 as the amount which was actually received by the assessee and added back rest of the amount of ex gratia payment claimed by the assessee. 4. The assessee preferred an appeal against the order dated April 25, 2005, of the Assessing Officer. The Commissioner of Income-tax (Appeals) following the decision of the Income-tax Appell....
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.... of section 3 of the Institutes of Technology Act, 1961;or (viia) any State Government; or (viib) the Central Government; or (viic) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette, specify in this behalf; or (viii) such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf ; or at the time of his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees: Provided that the schemes of the said companies or authorities or societies or Universities or the Institutes referred to in sub-clauses (vii) and (viii), as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including inter alia, criteria of economic viability) as may be prescribed: Provided further that where exemption has been allowed to an employee under this clause for any assessment yea....
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....monthly benefit payable under the voluntary retirement scheme consists of salary or benefit in lieu of salary, as defined in section 17(1) or (3) read with section 43(2) of the Act. Prior to amendment in the Act, 2003, any amount "received" by an employee on his voluntary retirement in accordance with any scheme of voluntary retirement, was not to be included in computing his total income for the previous year. Exemption is available to the extent of Rs. 5,00,000. Under the scheme, liability to pay was incurred and the amount became payable at the time when the employee was released having opted for the voluntary retirement under the scheme. Therefore, this is an amount, which is receivable by the employee at the time of voluntary retirement according to the scheme and became chargeable to tax under clause (a) of section 15 of the Act, even though not paid. 15. Section 10(10C) of the Act specifies that in computing total income received by any category of employee described in the section at the time of his voluntary retirement or termination of his service, along with a scheme or schemes of voluntary retirement, is not to be included to the extent of such amount does not exceed R....
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.... 10 was amended and the words "or receivable" were added after the words "received". The above amendment came into force, with effect from April 1, 2004. In certain cases, some of the employees availing of voluntary retirement scheme were facing problem in case the amount was given to them in instalments over a number of years. Keeping in view the above fact a Departmental Circular No. 7/2003 dated September 5, 2003, was issued which reads as under: [2003] 263 ITR (St.) 62, 72: "9.1. Under the existing provision contained in clause (10C) of section 10, any amount received by an employee of a public sector company or any other company or an authority established under a Central, State or Provincial Act or a local authority or a co-operative society, or a University, or Indian Institute of Technology, or State or Central Government, or an institution having national/State level importance, or a institute of management notified by the Central Government, etc., at the time of voluntary retirement, or in the case of public sector company, a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees, is not included in computing the total income of such e....
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.... As already mentioned above, the Legislature as a result of the amendment, clarified what was implicit in the provisions as they existed earlier. An amendment which is by way of clarification of an earlier ambiguous provision can be useful aid in construing the earlier provision, even though such amendment is not given retrospective effect. 22. It could not be the intention of the Legislature to extend the benefit under section 10(10C) of the Act to the employees, who retired before April 1, 2004, to restrict the sum to the extent the amount actually received by them at the time of voluntary retirement for that particular assessment year and to other employees of the same organization who opted for voluntary retirement after April 1, 2004, to extend that benefit for the amount received by them as well as the amount receivable by them in the subsequent financial years. Therefore, we are of the considered opinion that amendment was clarificatory and curative in nature. 23. Therefore, to the extent of Rs. 5 lakhs, the said amount is exempted from being charged to tax by reason of section 10(10C) of the Act. Even if the payment is stretched over a period of years, the same would not ....