TaxTMI 
TaxTMI 
2024 (9) TMI 1719
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....he Order without providing any further opportunity of making additional submissions, which were essential & necessary. The Appellant was debarred from making personal representation through Video Conferencing as specifically requested for & the principles of fair representation have not been allowed & the learned CIT (A) passed the Order hurriedly for no reason. 2. The Learned CIT (A) has confirmed by partially holding that amount of Rs. 50,72,750/- by treating it as Profits in lieu of Salary, he has erred in understanding the meaning of Compensation in reference to Sec. 17(3)(i) as explained by various High Courts & has failed to apply the established legal position of appellant's entitlement to receive & employer's Obligation to pay, are fundamental to hold the said amounts as compensation. He has erred in treating the said Capital Receipt amounts as Profits in lieu of Salary u/s 17(3), ignoring Explanation 3 of Sec. 17(2) & Rule 3 sub-clause (10) Explanation ()(). 3. The Learned CIT (A) has erred by not taking a balanced view by differing on the nature of the payments received from the employer, he erred in not accepting the amounts of Rs. 59,....
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....section 89 of the Act. 4. Both the learned representatives reiterated their respective stands against and in support of the impugned disallowance. It further transpires that this tribunal's recent coordinate bench's order in ITA. No. 117/PUN./2024 Ashok Raghunathrao Kulkarni vs. ITO, Aurangabad has already decided the very issue in assessee's favour and against the department as follows : "3. Facts of the case in brief, are that the assessee is an individual and filed his return of income on 02.08.2019 declaring total income of Rs. 61,10,370/-. The case was selected for compulsory scrutiny under the E-assessment Scheme, 2019 on the following issues: S.No. Issues i. Refund Claim ii. Relief for Arrear Salary or Advance Salary 4. Accordingly, statutory notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') were issued and served on the assessee, in response to which the assessee submitted details as called for by the Assessing Officer from time to time. 5. During the course of assessment proceedings the Assessing Officer noted from the ITR that the assessee has shown salary income of Rs.&nbs....
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....d they are eligible for the same. * Employees desirous of opting for this Scheme and whose Applications have been accepted by the Management will be informed in writing or by electronic mail about the acceptance of their Applications and the concerned Employee will be deemed to have voluntarily retired on February 8, 2019, unless mutually agreed otherwise. * If the Application has been accepted by the Management, the Employee will be paid compensation equivalent to the lesser of the following, subject to a minimum of 6(six) months' Wages drawn by the Employee..... ............................ * In addition to the Compensation as provided under Clause 5 above, each Employee whose signed Application has been accepted by the Company will also be entitled to incentives based on certain conditions ................................" 7. The assessee also gave the breakup of the amount of Rs. 57,12,674, details of which are as under : Ex-gratia (Severance pay) [Subject to a minimum of 6 (six months Wages drawn by the Employee: (i) 75 days wages for every year of service with the Company, Or Wages for the remaining month....
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....er Healthcare India P ltd. that it is not a voluntary retirement in normal course but a scheme to retire voluntary from their employment in order to provide a beneficial settlement to its permanent employees of the plant. It is on the employee to decide whether or not to opt for the same. Moreover, the payment of exgratia (severance pay) under the scheme together with all other dues mentioned therein is in full and final settlement of all the statutory and contractual dues owned to the assessee in connection with his employment with the company and the cessation thereof. It is also mentioned in the preamble of Financial scheme for employees at Auragabad 2019 (scheme) issued from the employer Pfizer Healthcare India P Ltd. that those employees who opt for voluntary retirement under the Scheme will not be entitled to any compensation or notice pay under the provisions of the Industrial Disputes Act, 1947 as their cessation from the employment constitutes resignation and does not constitute retrenchment or termination of employment by the company. 4.3.3 In the appellant's case, the company has issued Form 16 to the appellant showing the compensation including other due pa....
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....ial settlement to all permanent employees of the Plant. Towards this objective, the Company has taken a decision to offer a financial scheme to its permanent employees at the Plant, on the terms and conditions set out below. The Scheme (as hereinafter defined) is purely voluntary and it is for each such employee to decide whether or not to opt for the same. (iv) In the event the employees opt to retire voluntarily from their employment with the Company in accordance with the Scheme, their last day of employment with the Company will be February 8, 2019, (unless mutually agreed otherwise in writing) and they will be paid an attractive financial package on the terms and conditions set out below. Those employees who do not opt for the Scheme (as hereinafter defined), will be paid only statutory or contractual dues payable on cessation of employment, provided they are eligible for the same." 13. Referring to other terms and conditions as per clause (11), the Ld. Counsel for the assessee drew the attention of the Bench to the sub-clause (viii) of the same, which reads as under: "(viii) All Employees who opt for voluntary retirement under the Scheme will not be....
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.... the termination, payment made ex-gratia, therefore, totally voluntary and not compensation which implies some sort of obligation to pay and cannot be taxed as profits in lieu of salary within meaning of section 17(3) of the Act. Referring to the copy of letter of probation dated 20.07.2020 he drew the attention of the Bench to column 14 of the same which reads as under: "14. Notice Period : During the period of probation, your employment can be terminated without any notice or assigning any reason thereof on either side. On confirmation your employment can be terminated by one month's notice in writing or pay in lieu thereof on either side." 16. He accordingly submitted that the decision of the Hon'ble High Court of Calcutta cited (supra) is squarely applicable to the assessee. 17. The Ld. Counsel for the assessee referring to the decision of the Pune Bench of the Tribunal in the case of Mahadev Vasant Dhangekar vs. ACIT (2023) 149 taxmann.com 170 (Pune-Trib.) submitted that the Tribunal in the said decision has held that where the assessee had received Rs. 47.21 lacs from the erstwhile company as ex-gratia and letter has been issued by the employer....
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.... and the paper book filed by both the sides. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case rejected the claim of relief u/s 89 of the Act of Rs. 18,74,899/- on income of Rs. 57,12,674/- treating the same as income u/s 17(3) of the Act. We find the CIT (A) / NFAC upheld the action of the Assessing Officer, reasons of which are already reproduced in the preceding paragraphs. The CIT (A) / NFAC also rejected the alternate claim of the assessee that such amount being a capital receipt cannot be brought to tax. It is the submission of the Ld. Counsel for the assessee that in case of various other employees who have received similar compensation, the same has been accepted as capital receipt by the respective AOs in reassessment proceedings and no addition has been made. Further, various Co-ordinate Benches of the Tribunal in similarly placed employees have also treated such compensation received on termination of service as capital in nature and not falling u/s 17(3) of the Act. 24. We find the Assessing Officer in the case of Sharad D. Magar, who also resigned voluntarily from service of Pfizer Health....
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....s capital in nature. We, therefore, find merit in the arguments of the Ld. Counsel for the assessee that when the concerned AOs after reopening of the assessment have treated such compensation as capital in nature and the Revenue has not challenged the same and which has attained finality since no 263 proceedings have been initiated, therefore, the assessee's case being identical to the facts of the other employees of Pfizer Healthcare India Pvt. Ltd., the CIT (A) / NFAC is not justified in sustaining the addition made by the Assessing Officer. 26. We further find the Hon'ble Calcutta High Court in the case of CIT vs. Ajit Kumar Bose (supra) has observed as under: "4. The amount in question was received by the assessee from his employer. It was received by him in connection with the termination of his service. But the question still remains whether it was compensation. Since it was received by the assessee in connection with the termination of his employment, the term "compensation" would be referable to that event. In other words, it is to be seen whether the amount was paid as compensation for the termination or in lieu of the termination of the employment. ....