TaxTMI 
TaxTMI 
2023 (12) TMI 1498
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....DL/ JCIT (A)-9 MUMBAI Of CIT(A)( NFAC) is beyond the control of assessee as the assessee was unaware of the order passed u/s 143(3) by the Ld. A.O. on 29/10/2019. The order passed was never served upon the assessee. The order was obtained by the assessee only after making application on 23/09/2021 and paying necessary fees to the department. 3. That in this case assessment has been made u/s 143(3) of the Act on 29/10/2019. No notice u/s 143(2) & 142(1) has been served upon assessee. As per information from ITO notices has been sent on e-mail address of person mentioned in the returns filed. Even order passed u/s 143(3) has never been sent to assessee. 4 That in the facts and circumstance of the case the Id. ADDL/ JCIT (A)-9 MUMBAI Of CIT (A)(NFAC) has erred in law not condoning the delay in filing appeal & not adjudicating the appeal of assessee on merit. The assessee has filed a detailed affidavit explaining each day of the delay in filing the appeal . He came to know about the order u/s 143(3) dated 29/10/2019 when a notice of penalty u/s 270A dated 26/08/2021 was received by him by post on 02/09/2021 from the National Faceless Assessment Centre, Delhi. ....
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....e by the Id. A. O. 13. Assessee craves for Permission to modify or alter any grounds of appeal at the time of hearing. 2. The short issue involved in this appeal is relating to taxability of the compensation received by the assessee on his voluntary retirement from M/s HMT Ltd. (Tractor Division). In the original return filed by the assessee, the assessee offered the said amount of Rs. 19, 98,055/- on account of Voluntary Retirement Compensation as part of his taxable income and the return was processed u/s 143(1) of the Act. Subsequently, the assessee came to know that certain amounts received under the VRS were exempt in terms of provisions of section 10(10B) of the Act. Accordingly, the assessee filed an appeal again the intimation passed u/s 143(1) of the Act and submitted before the Ld. First Appellate Authority that the assessee was an illiterate person and was not aware of the fact that the amount received under VRS was exempt. This appeal before the Ld. NFAC was delayed by 691 days. The Ld. NFAC observed that the assessee could not demonstrate any sufficient cause for the delay in filing the appeal and proceeded to dismiss the assessee's appeal in limine. Ag....
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.... Provided further that the preceding proviso shall not apply in respect of any compensation received by a workman in accordance with any scheme which the Central Government may, having regard to the need for extending special protection to the workmen in the under- taking to which such scheme applies and other relevant circum- stances, approve in this behalf. Explanation. For the purposes of this clause- (a) compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment; (b) compensation received by a workman, at the time of the transfer (whether by agreement or by operation of law) of the ownership or management of the undertaking in which he is employed from the employer in relation to that undertaking to a new employer. shall be deemed to be compensation received at the time of his retrenchment if- (i) the service of the workman has been interrupted by such transfer; or (ii) the terms and conditions of service applicable to the work- man after such transfer are in any way less favourable to the workman than th....
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....mption thereunder shall be allowed to him in relation to any other assessment year: Provided also that where any relief has been allowed to an assessee under section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under this clause shall be allowed to him in relation to such, or any other, assessment year." 9. The relevant guidelines for the purposes of Section 10(10C) are contained in Rule 2BA which read as under: "2BA. Guidelines for the purposes of section 10(10C) The amount received' by an employee of- (i) a public sector company; or (ii) any other company; or (iii) an authority established under a Central, State or Provincial Act; or (iv) a local authority; or (v) a co-operative society; or (vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (vii) an Indian Institute of Technology within the meaning of cl....
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....at the time of his retrenchment. It has been clarified that compensation received by a workman at the time of closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment. It has been provided that such compensation could be determined and paid to the workman either under the Industrial Disputes Act of 1947 or under any other Act or Rules, orders or notifications issued there under or under any standing orders or under any award, contract of service or otherwise. Thus, the determination and payment of compensation doesn't necessarily be as per the Industrial Disputes Act and it could be under any other Act, rules, orders, instructions, award, etc. Further, it has been specifically provided that there could be a scheme which the Central Government may approve in this behalf having regard to the need for extending special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances and the workman receives the compensation in accordance with the scheme so approved. Further, depending upon whether the compensation is determined as per the Industrial Disputes Act or ....
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....r III and it deals with incomes not included in total income. Section 10 states that in computing the total income of a previous year of any person, any income falling within any of the clauses mentioned therein shall not be included. For the purpose of this case, sub- section (10B) & (10C) of Section 10 would be relevant, which are quoted herein below :- Incomes which do not form part of Total Income Incomes not included in total income. 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included. ......... S. 10(10B) any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, [at the time of his retrenchment: Provided that the amount exempt under this clause shall not exceed :- (i) an amount calculated in accordance with the provisions of clause (b) of Section 25F of the Industrial Disputes Act, 1947 (14 of 1947); or (ii) such amount, not being le....
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....t 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 year, no exemption thereunder shall be allowed to him in relation to any other assessment year:]. 29. The case of the revenue is that the package given to the workmen is a VRS package and it would fall within Section 10(10C) (viii) and accordingly, taxable if the receipt exceeds the exempted limit. The case of the petitioner is that the severance package received by them would fall within Section 10(10B) and shall not be included as income in computing total income of the employees. The contention of the revenue that TDS proceeding is independent of the other provisions of the Act cannot be disputed, but however, what the revenue seeks to a state is that it is for the Assessing Officer to examine as to whether the receipts in the hand....
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....tion to the workmen in the undertaking to which such scheme applies and other relevant circumstances, approve in its behalf. The compensation which is received by the workmen would fall within the definition of compensation found in explanation to Section 10(108). 32. In such circumstances, this Court has no hesitation to hold that the package having been received by the workmen as compensation pursuant to the decision taken by the Central Government to offer special protection to the employees of HPF, the same stands exempted from deduction to income tax. 33. W.P. No. 18608 of 2015; the petitioner in this Writ Petition is an association of officers working in HPF and the relief sought for by them is also identical. The yardstick applicable to workmen as defined under the Industrial Disputes Act, cannot be made applicable to the officers. Therefore, under normal circumstances whatever reasoning assigned by this Court in the preceding paragraphs would apply to the employees in the workmen category. Nevertheless, the Central Government does not make any distinction in its press information, dated 28.02.2014, nor do the impugned proceedings/circular, as it has extend....
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....accept the severance package though without prejudice to their rights in the writ petition. Now the writ petition has been finally disposed of, it is only the implementation of the severance package which shall be done within one month from the date of receipt of a copy of this order. (vi) As agreed to by the employees of the HBF, all the employees on receipt of the severance packages in terms of the above direction shall vacate and hand over vacant possession of the quarters within a period of one month from the date on which they received the monetary benefits. No costs. Consequently, connected Miscellaneous Petitions are closed. 14. In the aforesaid case, it was held by the Hon'ble Madras High Court that the Government of India did not authorise the HPF to bring out a VRS package, but what was approved was a non-plan budgetary support, which is in the nature of a grant given by the Central Government to the second respondent for a specific purpose and a specific reason. The purpose is to rehabilitate the employees of HPF and the reason being that the employees have been receiving the pay scales as of 1987, the increase in the cost of living has made it very....
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....f selected parcels of land at Bangalore and Kochi to Government entities. 2. HMT Ltd., a Central Public Sector Enterprise under the Ministry of Heavy Industries and Public Enterprises of the Government of India was established at Bangalore in 1953 with the objective of producing machine tools required for building an industrial edifice for the country. HMT played a key role in laying the foundation for evolution of engineering and manufacturing capabilities in the country. HMT Tractor Division was established in Pinjore, Haryana in 1971 to manufacture HMT Tractors. Performance of the company started to decline in the '90s, in the post liberalisation economic environment with rising costs, stiff competition from international players and availability of imported goods at cheaper rates. Several efforts were made in past to arrest the declining trend but it could not succeed to turn around. HMTL's profit making tractor business was affected due to poor off-take, under-utilisation of capacity and working capital constraints, etc. It was observed that continuation in Tractor Business with its insignificant market share in the sector may not be a financially viable and s....
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...., for all the permanent employees on the rolls of HMT Tractor Division, with Immediate effect. The employees who apply under the Scheme and whose VRS/VSS application is accepted by the Competent Authority will be relieved in a phased manner. The Scheme is subject to the following: 1. The Voluntary Retirement Scheme(s) (VRS) / Voluntary Separation Scheme(s) (VSS) shall be operative with Immediate effect and shall be in force upto 5th December 2016. The employees should submit their VR/VS application In the prescribed format indicating clearly under which scheme (Scheme-A, Scheme B1 or Scheme 82) they opt for VR/VS as detailed In the enclosure. Once the VR/VS application is duly accepted and the employee relieved, the employee-employer relationship stands severed. 2. The VRS/VSS ex-gratia shall be calculated on the Salary (2007 notional basic pay DA) mentioned under the Scheme(s) on the basis of 30 days a month. Only 2007 notional basic pay and DA will be considered for computation of VRS/VSS ex-gratia. 3 The eligibility period for computing the completed years of service will be reckoned as, upto the date of release of the applicant, for the purpose of cal....
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....." 17. We also refer to letter No. 1-0501/8/2015-PE.X dated 4/11/2006 on the subject of budgetary support to HMT Ltd for payment of outstanding salary/wages, other statutory dues, introduction of VRS/VSS and closure of operation of the Tractor Division and transfer of land to Govt. entities issued by the Under Secretary, Ministry of Heavy Industries and Public Enterprises, Department of Heavy industry, Government of India and addressed to the Chairman and Managing Director of HMT Ltd and the contents thereof read as under: "Subject :- Budgetary support to HMT Ltd for payment of outstanding salary/wages and other statutory dues, Introduction of VRS/VSS and closure of operations of Tractor Division and transfer of land to Government entities Sir, I am directed to say that Cabinet in its meeting held on 27.10.2016 considered a Note dated 23.09.2016 and Supplementary Note dated 01.10.2016 and on the above subject and approved the following- (i) Closure of operations at HMT Tractor Division with offer of attractive and improved VRS/VSS package to allow ex-gratia and terminal benefits based on 2007 notional pay scales, In relaxation of DPE gui....
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....is issue is proposed to be negotiated in detail with GoH. The process of transferring of land to GoH on mutually agreed terms and negotiation of suitable compensation will be undertaken in a time bound manner after the due approval of Cabinet." In addition, sale of other assets, which will become surplus after closure of the Tractor Division. The Company would explore the possibilities of using the productive resources, for example, factory premises of HMT Tractor Division with clearly demarcated land and buildings, plants and machineries, for leasing out on 'As Is Where is' basis to interested private parties engaged preferably In Capital Goods or Auto sector, on medium or long term basis after duly safeguarding the Gol Interest Failing this, an alternative option for strategic sale of the HMT Tractor Factory, Pinjore to national or International parties may be explored in consultation with DIPAM. In case, the productive resources/ assets of HMT Tractor Limited at Pinjore fall to elicit response of MSME Industries under medium and long term lease, falling which alternative option of strategic sale of the HMT Pinjore factory, Pinjore to national and Intern....
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.... that appellant is one of the employees of the HMTL-TD. This Tractor Division/Unit of HMTL was a loss-making Central Government Public Sector Undertaking for the last several years. Government of India in its Cabinet Meeting dated 27th October 2016 approved budgetary support to HMTL for payment of outstanding salary, introduction of VRS/VSS and closure of operations of Tractor Division. A press release was also issued on the same day. In compliance to this, an Office Order No. 15/16 dated 4th November 2016 regarding VRS/ VSS scheme was announced by HMTL Bangalore for all the permanent employees who were on the rolls of Tractor Division as on that date. That scheme further envisages that employees not opting for VRS would be retrenched under the Industrial Disputes Act, 1947 as the Tractor Division is proposed to be closed down. Tax was deducted at source on compensation received at the time of VRS Appellant by way of revised return claimed that the said compensation is exempt under Second proviso and first explanation of Section 10(108) of Act. For this appellant placed reliance on the case of Hindustan Photo Film Workers Vs. The Government of India WP No. 18566 of 2015 dated 17.03....
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....f employees/workers though it is not their (PSU) right. VRS/WSS of HMTL-TD is also result of these facts and circumstances. This intent and purpose is also emanating from the Press release dated 27.10.2016 issued wherein it is stressed that Cabinet approves Budgetary support to HMT Ltd for payment of outstanding salary, introduction of VRS/VSS and closure of operations of Tractor Division, Transfer of land to Government entities have been approved. Press release states that HMTL, a Central Public Sector Enterprise under the Ministry of Heavy Industries and Public Enterprises of the Government of India was established at Bangalore in 1953 with the objective of producing machine tools required for building an industrial edifice for the country. HMT has played a key role in laying the foundation for evolution of engineering and manufacturing capabilities in the country. HMT Tractor Division was established in Pinjore, Haryana in 1971 to manufacture HMT Tractors Performance of the company started to decline in the '90s, in the post liberalization economic environment with rising costs, stiff competition from international players and availability of imported goods at cheaper rates.....
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....d. Of course some of the employees were not in favour of VRS Scheme as at this age nobody would get second job so they were interested in transfer and 150 persons who have not opted for VRS were retrenched by the Government subsequently and their cases are still pending with Punjab and Haryana High Court. Hence, it was a case of forced VRS on the employees as they have no choice. [ 5.2.2. Let's understand the facts of VRS package of Hindustan Photo Film Workers (HPF) and HMTL-TD as per comparative chart given below. HPF HMTL-TD HPF was Govt. Company under Department of Heavy Industries. HMTL is Govt. Company under Department of Heavy Industries. HPF had no subsidiary HMT is a holding Company and following subsidiaries :- HMT Machine Tools Limited-[Tractor Division Pinjore is under closurel. HMT (International) Limited HMT Watches Ltd,( Under Closure) HMT Chinar Watches Ltd(Under Closure ) HMT Bearings Ltd have( Under Closure ) Closure was of HPF Closure was of Tractor Division of HMTL only HPF was sick company. Cabinet HMT was sick company. Approved Closure of HP....
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....d Public Enterprise has guidelines CPSEs in non-strategic sector which have no scope for revival and are to be closed in a timebound manner. Since there are employees working in these CPSEs, Government decided that closure should not cause hardship to them and has now laid down auniform policy to give workers VRS at 2007 notional pay scale irrespective of the pay scale in which they are working. In 2015-16 FY 447 employees took VRS In 2016-17 FY19 employees took VRS In 2016-17 FY 850 employees took VRS As on 31.03.2017 there were 170 permanent employees. As on 31.03.2018 there were 103 permanent employees. The operations of the Company have come to a standstill due to disconnection of power to the Polyester X-Ray Plant and R&D from May 2013 and non-availability of funds to procure the raw materials. The operations of the Tractor Division have come to a standstill due to disconnection of power to the Tractor Plant and R&D from March2017. 5.2.3. The facts, intend and purpose of HMTL-TD are identical with the facts of HPF. Ld. AO has failed to appreciate finer details and observations of the Hon'ble Madras High Cou....
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....cashment etc. are also pending for the employees of other Divisions of HMTL ie. Corporate Head Office (CHO), Common Service Division (CSD) and Food Processing Machinery Unit, Aurangabad (FPA). In view of the deteriorating position of the company and hardship being faced by the employees due to non-payment of salary / wages and other retirement dues, it has been decided to close down the Tractor Division of HMT Ltd by offering attractive VRS / VSS to its employees and clearing all their dues. In view of these facts and circumstances and by placing reliance on the case of HPF supra (SLP filed by the Union Government has also been dismissed by the Hon'ble Supreme Court], it is my considered opinion that the compensation received by the appellant at the time of VRS qualifies the parameters laid down under section 10 (10B) of Act. AO is directed to delete the addition. The Grounds of Appeal Nos. 1 &2 are allowed." 19. Having perused the aforesaid material available on record, we have no hesitation but to agree with the aforesaid findings of the ld CIT(A). The ld CIT(A) has rightly held that the money has been earmarked under budgetary support by the Government of India to H....
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...., Bengaluru has processed the return, treating the VR benefit as part of total income. 8. In this connection, the provisions of Section 10(10B) of the Income Tax Act are reproduced, as below. "Any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, ........... Explanation - For the purposes of this clause- 1. Compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment; (emphasis supplied) 8.1 From the above provisions, it is clear that the income received on opting for Voluntary Retirement Scheme is an exempted income and does not form part of total income. Therefore, in view of the above discussion and after having gone through the case law relied upon by the appellant, the amount received by the appellant on opting for Voluntary Retirement is exempt u/s. 10(10B) and hence, the ground of appeal, is allowed." ....
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....osure of his employer, HMT watches Ltd, Ranibagh. The closure of the company and subsequent compensation to employees was made according to the decision of the Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Ministerp Shri Narendra Modi, vide press notification dated 06/01/2016, by the Government of India. 4.6 Section 10(10B) of the Income Tax Act, 1961 exempts any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other act or rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, at the time of retrenchment. The first proviso to section 10(10B) provides certain restrictions and limits the amount of exemption under this section. However the second proviso to section 10(10B) reads as under: "provided further that the preceding proviso shall not apply in respect of any compensation received by a work man in accordance with any scheme which the central government, may, having regard to the need for extending special protection to the workmen in the undertaking which such a scheme applies and other relevant circumstances, u....
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....nd a specific reason. The purpose is to rehabilitate the employees of HPF and the reason being that the employees have been receiving the pay scales as of 1987, the increase in the cost of living has made it very difficult for them to survive and meet their financial obligations and the Government thought fit to offer this package to enable the employees to come out of the financial crises. If such was the sanction made by the Central Government, it undoubtedly would qualify the parameters laid down under sub-section (108) of Section 10 of the Income Tax Act. This is so because the monetary benefit which will accrue to the employees is in the nature of a compensation, which is pursuant to a decision taken by the Government of India specifically for the employees of HPF. Therefore, the amount would be exempted from income tax in terms of the first proviso under Section 10(108) of the IT Act. In terms of clause (2) of first proviso, the ceiling limit is Rs. 5,00,000/-. The second proviso states that the first proviso shall not apply in respect of any compensation received by a workmen in accordance with any scheme, which the Government may, having regard to the need for extending the....