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The Tax Publishers2005 TaxPub(DT) 1054 (Mad-HC) : (2005) 002 (II) ITCL 0018 : (2005) 273 ITR 0307 : (2005) 193 CTR 0661 : (2005) 144 TAXMAN 0784 CIT v. G.V. Venugopal () INCOME TAX --Relief under s. 89----VRS paymentsSimultaneous benefit under section 10(10C) and section 89(1)-- Catch Note: The assessee was an employee of State Bank of India, had opted for voluntary retirement and was paid Rs.5,85,072 by the employer under the VRS. This amount received by the assessee was in addition to the regular retirement benefits such as gratuity, leave encashment salary, etc. The assessee claimed exemption of Rs.5 lakhs from the said VRS amount under section 10(10C) of the Act and offered balance amount to tax as income from the salary. At the same time, the assessee also claimed relief of Rs.8,883 under section 89(1) on this amount by spreading the same in three preceding assessment years as provided in Rule 21A of the Income Tax Rules. The assessing officer disallowed the relief under section 89(1) of the Act in addition to the exemption allowed under section 10(10C) of the Act. The Tribunal held that the assessee is eligible to claim simultaneous benefit under Section 10(10C) as well as section 89(1) in respect of the compensation received under the voluntary retirement scheme. Held: Was justified. The assessee was entitled to twin benefit under sections 10(10C) and 89(1). Ratio: In respect of payments received at the time of VRS, simultaneous benefits under sections 10(10C) and 89(1) can be obtained. Held: The assessing officer in his assessment order observed that once exemption is allowed under section 10(10C) no further exemption can be allowed in relation to any other assessment year in view of the proviso to section 10(10C). The view taken by the assessing officer is clearly incorrect. The second proviso to section 10(10C) only refers to exemption claimed in any other assessment year. It is well settled that every assessment year is a self-contained unit. The assessment year in question in the present case is 2001-02 and the exemption claimed is in respect of this assessment year, although the exemption granted under section 89(1) has been spread over several assessment years. The mere fact that the relief has been spread over several years, does not mean that the relief is not in respect of a particular assessment year. The Tribunal has rightly pointed out that in the Income Tax Act, there are several provisions granting twin or double benefits, while in other provisions, twin or double benefits has been specifically prohibited. There is no prohibition to the twin benefits in respect of the amount received under the Voluntary Retirement Scheme. The relief contemplated under section 89(1) of the Act is aimed to mitigate hardship that may be caused on account of the high incidence of tax due to progressive increase in tax rates. The word 'salary' as defined in section 17 of the Act includes any profit in lieu of salary, which has been defined in section 17(3) of the Act to include any amount of compensation due or received by the assessee from his employer or former employer in connection with the termination of his employment. Hence, payment under the Voluntary Retirement Scheme is covered by the word 'salary', which has been given a very wide definition in section 17. Since the assessee is covered by section 89, he will get both the benefits, which he has claimed for. Date of Judgment: 6 December 2004 Cases Referred: CIT v Naga Hills Tea Co Ltd. AIR 1973 SC 2524, CIT v. Shahzada Nand & Sons (1966) 60 ITR 392 (SC), CIT v. Kulu Valley Transport Co.(P) Ltd. (1970) 77 ITR 518 SC), CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC), Collector of Estate Duty v R. Kanakasabai (1973) 89 ITR 251 (SC), Sun Export Corp v Collector of Customs 1997 6 SCC 564, CIT v Kullu Valley Transport Co (1970) 77 ITR 518 (SC), CIT v Hindustran Milk Food Mfg Co (1975) 98 ITR 441 (Punj), CED v Kanakashabai (1973) 89 ITR 251 (SC) at 257, Cape Brady Syndicate v IRC (1921) 1 KB 64, A.V.Fernandex vs. State of Kerala AIR 1957 SC 657, State of Punjab v Jullunder Vegetable Syndicate AIR 1955 SC 1295, ITO v Nadar AIR 1968 SC 623, CWT v Kripashanker AIR 1971 SC 2363 : (1971) 82 ITR 570 (SC), Innamuri Gopalan v State of AP 1964 SCR (2) 888, ITO v Nadar (AIR 1968 SC 623, S. K Verma v Industrial Tribunal AIR 1981 SC 422, State Trading Corporation v CTO AIR 1963 SC 1811, CIT v G.Hyatt AIR 1971 SC 725, Polester & Co Ltd v Addl Comm of Sales Tax AIR 1978 SC 897, Assessing Authority v East India Cotton Mfg Co Ltd 1981 48 STC 239, CWT v Ellis Bridge Gymkhana AIR 1998 SC 120, CIT v N.C. Budharaja AIR 1993 SC 2529, Steel Authority of India v CCE AIR 1996 SC 2544, Partington v Attorney General (1869) LR HL 100, CIT v Shahzada Nand AIR 1966 SC 1342). In IRC v Hinchy 1960 AC 748, CIT v Firm Muar AIR 1965 SC 1216 . CIT v Madho Prasad Jatia 1976 4 SCC 92, Bank of Chettinad v CIT AIR 1940 PC 183 and CIT v B. M. Kharwar AIR 1969 SC 812 SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2005 TaxPub(DT) 1054 (Mad-HC) : (2005) 002 (II) ITCL 0018 : (2005) 273 ITR 0307 : (2005) 193 CTR 0661 : (2005) 144 TAXMAN 0784

CIT v. G.V. Venugopal ()

INCOME TAX

--Relief under s. 89----VRS paymentsSimultaneous benefit under section 10(10C) and section 89(1)--

Catch Note:

The assessee was an employee of State Bank of India, had opted for voluntary retirement and was paid Rs.5,85,072 by the employer under the VRS. This amount received by the assessee was in addition to the regular retirement benefits such as gratuity, leave encashment salary, etc. The assessee claimed exemption of Rs.5 lakhs from the said VRS amount under section 10(10C) of the Act and offered balance amount to tax as income from the salary. At the same time, the assessee also claimed relief of Rs.8,883 under section 89(1) on this amount by spreading the same in three preceding assessment years as provided in Rule 21A of the Income Tax Rules. The assessing officer disallowed the relief under section 89(1) of the Act in addition to the exemption allowed under section 10(10C) of the Act. The Tribunal held that the assessee is eligible to claim simultaneous benefit under Section 10(10C) as well as section 89(1) in respect of the compensation received under the voluntary retirement scheme. Held: Was justified. The assessee was entitled to twin benefit under sections 10(10C) and 89(1).

Ratio:

In respect of payments received at the time of VRS, simultaneous benefits under sections 10(10C) and 89(1) can be obtained.

Held:

The assessing officer in his assessment order observed that once exemption is allowed under section 10(10C) no further exemption can be allowed in relation to any other assessment year in view of the proviso to section 10(10C). The view taken by the assessing officer is clearly incorrect. The second proviso to section 10(10C) only refers to exemption claimed in any other assessment year. It is well settled that every assessment year is a self-contained unit. The assessment year in question in the present case is 2001-02 and the exemption claimed is in respect of this assessment year, although the exemption granted under section 89(1) has been spread over several assessment years. The mere fact that the relief has been spread over several years, does not mean that the relief is not in respect of a particular assessment year. The Tribunal has rightly pointed out that in the Income Tax Act, there are several provisions granting twin or double benefits, while in other provisions, twin or double benefits has been specifically prohibited. There is no prohibition to the twin benefits in respect of the amount received under the Voluntary Retirement Scheme. The relief contemplated under section 89(1) of the Act is aimed to mitigate hardship that may be caused on account of the high incidence of tax due to progressive increase in tax rates. The word 'salary' as defined in section 17 of the Act includes any profit in lieu of salary, which has been defined in section 17(3) of the Act to include any amount of compensation due or received by the assessee from his employer or former employer in connection with the termination of his employment. Hence, payment under the Voluntary Retirement Scheme is covered by the word 'salary', which has been given a very wide definition in section 17. Since the assessee is covered by section 89, he will get both the benefits, which he has claimed for.

Date of Judgment:

6 December 2004

Cases Referred:

CIT v Naga Hills Tea Co Ltd. AIR 1973 SC 2524, CIT v. Shahzada Nand & Sons (1966) 60 ITR 392 (SC), CIT v. Kulu Valley Transport Co.(P) Ltd. (1970) 77 ITR 518 SC), CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC), Collector of Estate Duty v R. Kanakasabai (1973) 89 ITR 251 (SC), Sun Export Corp v Collector of Customs 1997 6 SCC 564, CIT v Kullu Valley Transport Co (1970) 77 ITR 518 (SC), CIT v Hindustran Milk Food Mfg Co (1975) 98 ITR 441 (Punj), CED v Kanakashabai (1973) 89 ITR 251 (SC) at 257, Cape Brady Syndicate v IRC (1921) 1 KB 64, A.V.Fernandex vs. State of Kerala AIR 1957 SC 657, State of Punjab v Jullunder Vegetable Syndicate AIR 1955 SC 1295, ITO v Nadar AIR 1968 SC 623, CWT v Kripashanker AIR 1971 SC 2363 : (1971) 82 ITR 570 (SC), Innamuri Gopalan v State of AP 1964 SCR (2) 888, ITO v Nadar (AIR 1968 SC 623, S. K Verma v Industrial Tribunal AIR 1981 SC 422, State Trading Corporation v CTO AIR 1963 SC 1811, CIT v G.Hyatt AIR 1971 SC 725, Polester & Co Ltd v Addl Comm of Sales Tax AIR 1978 SC 897, Assessing Authority v East India Cotton Mfg Co Ltd 1981 48 STC 239, CWT v Ellis Bridge Gymkhana AIR 1998 SC 120, CIT v N.C. Budharaja AIR 1993 SC 2529, Steel Authority of India v CCE AIR 1996 SC 2544, Partington v Attorney General (1869) LR HL 100, CIT v Shahzada Nand AIR 1966 SC 1342). In IRC v Hinchy 1960 AC 748, CIT v Firm Muar AIR 1965 SC 1216 . CIT v Madho Prasad Jatia 1976 4 SCC 92, Bank of Chettinad v CIT AIR 1940 PC 183 and CIT v B. M. Kharwar AIR 1969 SC 812