TaxTMI 
TaxTMI 
2025 (11) TMI 1749
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the course of assessment proceedings the Assessing Officer asked the assessee to explain as to why the severance amount of Rs. 30,86,974/- received from Monsanto India Limited upon cessation of employment should not be brought to tax. The assessee in response to the same submitted that the same was received on the basis of resignation letter to Monsanto India Limited on 18.08.2017 which was accepted by the said company and the assessee was relieved from the services vide letter dated 31.08.2017. It was argued that the severance amount of Rs. 30,86,974/- received from Monsanto India Limited is a type of a capital receipt and not revenue receipt and therefore, it should not be taxable. For the above proposition, he relied on various decisions. 4. However, the Assessing Officer was not satisfied with the arguments advanced by the assesse. He noted that in assessee's case it was a voluntary cessation of employment by the assessee and not the termination by Monsanto India Limited (company) as claimed by the assessee. Also the assessee did not lose his right of seeking job in another company in future. Further, the assessee in the instant case has joined another company (Syngenta I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essation of Employment which means termination of employment. 2) In point 7 they have clearly mentioned that "upon termination of your employment 3) in point 8 of the letter they have assured that Company will keep confidential about the Cessation of Employment 4) in your notice you have referred to that I have given resignation and was accepted on 18th August 2017. Please also refer to point 1 of the letter, where the reference is made to letter of resignation dated 18th August 2017 only. No Company will pay notice period plus the severance on my same day resignation and release from duty. It was just to complete paper work they asked me to sign on the resignation paper same day on termination 7.2 On perusal of material available on record, my observations are noted below- * The observation of Assessing Officer is correct in holding that cessation of employment is voluntary by the appellant and not on termination by the employer-Monsanto. This is evident from the letter of acceptance of resignation and the relevant extracts are reproduced below- 1. This is with reference to your letter of resignation dated 18-August-2017 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....use (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 sub-clause, the expression "keyman insurance policy" shall have the meaning assigned to it in clause (10D) of section 10; (iii) Any amount due to or received, whether in lump sum or otherwise, by any assessee from any person:ー (A) Before his joining any employment with that person, or (B) After cessation of his employment with that person." 7.6 Further, Hon'ble Delhi High Court has largely clarified the intent of legislature in this regard in the case of CIT vs. Deepak Verma- Though sub-clause (iii) squarely covered the nature of payment received by the assessee, that did not exist in the relevant assessment year and was incorporated only with effect fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In the instant case, all dues admissible to the assessee on his resignation were otherwise paid by the employer to him. Therefore, whatever terminal dues, including earned salary, etc., which were payable to the assessee in terms of contract or otherwise were paid to him. In addition, the employer agreed to pay 'in its discretion' certain amount as an 'exceptionable' and 'one off ex gratia payment. It was very clearly stated in the letter of the employer that management had agreed to pay that amount in its discretion. It was not compelled by any obligation to pay that amount which would assume the nature of any 'compensation'. The amount was also described as not only exceptionable but ex gratia. It, therefore, clearly partook the character of voluntary payment and could not be termed as a payment by way of 'compensation [Para 19] In fact, the Legislature wanted such type of payments also to be treated as income at the hands of the employees/persons and to tax them. For that reason, sub-clause (iii) was inserted in section 17(3). This also implies that such a payment was not taxable before this amendment was carried out by inserting sub-c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to premature cessation of his employment & permanent loss of Source of Income. The CIT(A) has failed to attend & adjudicate the claim & has brought nothing on record to refute the claim of Capital Receipts. 4. The Learned CIT(A) has erred by not considering the jurisdictional & binding Judgement of Calcutta, Delhi, Gujarat High Court & other Judgment of various High Courts. The Learned CIT(A) has just brushed aside all the legal citation by holding that the same are not applicable. The Learned CIT(A) was bond to consider the squarely applicable Judgements of Delhi & Gujarat ITAT on the principles of binding precedence. 5. The Appellant Craves Leave to add, Alter, or amend any of the Grounds of the Appeal, before or during hearing of the Appeal. 7. The Ld. Counsel for the assessee at the outset filed a copy of appointment letter from Monsanto India Limited which is placed at pages 6 to 7 of the paper book with a request to admit the same as an additional evidence. He submitted that this appointment letter which contains the issue regarding termination by the company or resignation by the assessee has got a bearing on the whole issue and therefore, the same shoul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vide ITA No.850/PUN/2024 for assessment year 2019-20, order dated 17.09.2024 vi) Atul Shashikant Garbhe vs ITO vide ITA No.863/PUN/2024 for assessment year 2019-20, order dated 17.09.2024 vii) Shri Parvez Mukhtar Khan vs ITO vide ITA No.1111/PUN/2024 for assessment year 2019-20, order dated 27.09.2024 viii) Shrikant Anantrao Zori vs ITO vide ITA No.798/PUN/2024 for assessment year 2020-21, order dated 28.01.2025 ix) Mahadev Vasant Dhangekar vs. ACIT (2023) 149 taxmann.com 170 (Pune-Trib.) 13. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and submitted that the severance amount was received by the assessee on account of his resignation and therefore, it cannot be treated as capital in nature and has to be considered as part of salary income as per the provisions of section 17 of the Act. He accordingly submitted that the order of the Ld. CIT(A) / NFAC be upheld and the grounds raised by the assessee be dismissed. 14. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the....