INCOME TAX ACT, 1961

Section 4

Income - Taxability - Severance compensation refunded to previous employer on account of dispute -

Assessee in his original return of income included severance payment of Rs. 2.01 crores which was paid to the assessee by his previous employer Vedanta Ltd. However when there was a dispute, assessee paid back Rs. 80.5 lakhs to Vedanta, therefore, in the revised return, this amount was reduced from total income. As per AO, such action of reduction from total salary was actually linked with violation of the provisions of severance/non/compete agreement by the assessee entered between assessee and his employer, i.e., Vedanata and it did not in any way affect actual receipt of salary by the assessee from his previous employer. Held: Evidence was placed on record by which event of refunding the money of Rs. 80.5 lakhs to Vedanta Ltd. was established. When a particular amount is actually not retained by an assessee, then there does not arise any question of taxing that amount. Assessee made a refund of Rs. 80.5 lakhs on account of provisions contained in the confidentiality and non-compete agreement read with MOU between assessee and Vedanta Ltd. and therefore, such refund could not be construed as salary for the purpose of charging to tax. Such amount, therefore, was not assessable as income.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2016-17

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