The ACIT, Circle-2(1),, Visakhapatnam v. Sri LV Brahmam,, Visakhapatnam

ITA 178/VIZ/2007 | 2004-2005
Pronouncement Date: 02-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 17825314 RSA 2007
Assessee PAN AALPL5833D
Bench Visakhapatnam
Appeal Number ITA 178/VIZ/2007
Duration Of Justice 2 year(s) 9 month(s) 23 day(s)
Appellant The ACIT, Circle-2(1),, Visakhapatnam
Respondent Sri LV Brahmam,, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 02-03-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 02-03-2010
Assessment Year 2004-2005
Appeal Filed On 10-05-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SRI B.R. BASKARAN ACCOUNTANT MEMBER I.T.A. NO. 178/VIZ/2007 ASSESSMENT YEAR : 2004-05 ACIT CIRCLE-2(1) VISAKHAPATNAM VS. L.V. BRAHMAM VISAKHAPATNAM (APPELLANT) (RESPONDENT) . PAN NO: AALPL 5833 D APPELLANT BY : SHRI G.S.S. GOPINATH DR RESPONDENT BY : SHRI I. KAMASASTRY CA O R D E R PER B..R. BASKARAN ACCOUNTANT MEMBER : 1. THE APPEAL OF THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 14.3.2007 PASSED BY LD CIT(A)-II VISAKHAPATNAM AND IT RELATE S TO THE ASSESSMENT YEAR 2004-05. 2. THE GROUNDS RAISED BY THE REVENUE GIVE RISE TO A SINGLE ISSUE VIZ. WHETHER THE LD CIT(A) IS JUSTIFIED IN HOLDING THAT THE ASSE SSEE IS ENTITLED FOR EXEMPTION U/S 10(10C) OF THE ACT IN RESPECT OF VRS COMPENSATION R ECEIVED BY HIM. 3. THE FACTS OF THE CASE ARE STATED IN BRIEF. ACCORDING TO LD AR THE ASSESSEE HEREIN TOOK VOLUNTARY RETIREMENT FROM HSBC (HONG KO NG AND SHANGHAI BANKING CORPORATION) AFTER PUTTING IN 32.6 YEARS OF SERVICE WHILE THERE WAS A BALANCE OF 49 MONTHS SERVICE TO BE PUT IN TO ATTAIN SUPER ANNUATI ON. THE ASSESSEE RECEIVED A SUM OF RS.11 51 035/- AS COMPENSATION ON VOLUNTARY RETIREMENT. THE ASSESSEES CLAIM FOR EXEMPTION OF RS.5.00 LAKHS U/S 10(10C) OF THE ACT WAS REJECTED BY THE AO FOR THE REASON THAT THE SENIOR MANAGER HUMAN RE SOURCES HSBC HAD COMMUNICATED TO THE AO THAT AS PER HIS COMPANYS VR S PACKAGE THE COMPENSATION SIGNIFICANTLY EXCEEDS THE LIMITS LAID DOWN IN CLAUSE (VI) OF RULE 2BA AND HENCE THE EXEMPTION PROVIDED U/S 10(10C) WILL N OT APPLY TO THEIR EMPLOYEES. 2 IN THE APPEAL PREFERRED BY THE ASSESSEE LD CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE ON THE FOLLOWING GROUNDS: (A) THE EMPHASIS IN RULE 2BA IS ON THE AMOUNT REC EIVABLE ON ACCOUNT OF VOLUNTARY RETIREMENT SCHEME WHICH SHOULD NOT EXCEED THE LIMITS PRESCRIBED THEREIN. THE LD CIT(A) PLACED HIS RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ARUN KUMAR T MAKWANA V IT O REPORTED IN 204 CTR 33 IN THIS REGARD. (B) THE CBDT CIRCULAR NO.640 DATED 26.11.1992 REPO RTED IN 108 CTR (ST.) 17 PROVIDES GUIDELINES FOR THE PURPOSES OF SECTION 10(10C) OF THE ACT AND IT CLEARLY STATES THAT THE AMOUNT RECEIVABLE BY AN EMP LOYEE WILL QUALIFY FOR EXEMPTION U/S 10(10C) OF THE ACT UP TO RS.5.00 LAKH S. (C) THE GUIDELINES CONTAINED IN RULE 2BA ONLY GU IDE THE WAY IN WHICH THE VRS COMPENSATION TO BE GIVEN TO AN EMPLOYEE IS TO B E CALCULATED AND THEY NEED NOT BE APPLIED WITH RIGIDITY. AGGRIEVED BY THE ORDER OF LD CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 4. ACCORDING TO LD DR THE VOLUNTARY RETIREMENT SCHEME OF THE HSBC IS NOT IN ACCORDANCE WITH THE CONDITIONS PRESCRIBED UNDER RUL E 2BA OF THE INCOME TAX RULES AND HENCE THE ASSESSEE IS NOT ENTITLED FOR DE DUCTION U/S 10(10C) SINCE UNDER SECTION 10(10C) IT IS MANDATORY THAT THE VOL UNTARY RETIREMENT SCHEME SHOULD BE IN ACCORDANCE WITH THE RULE 2BA. LD DR F URTHER SUBMITTED THAT THE EMPLOYER VIZ. HSBC HAS ALSO CONFIRMED THAT THE CO MPENSATION AS PER THEIR SCHEME SIGNIFICANTLY EXCEEDS THE LIMITS PROVIDED UN DER RULE 2BA. ACCORDING TO LD AR THE ASSESSING OFFICER HAS SIMPLY ACTED ON TH E BASIS OF LETTER GIVEN BY AN OFFICIAL OF THE HSBC BANK WITHOUT ACTUALLY PROVING THAT THE AMOUNT RECEIVED AS VRS COMPENSATION WAS NOT IN ACCORDANCE WITH RULE 2B A. BY PLACING RELIANCE ON THE FOLLOWING CASE LAW THE LD AR SUBMITTED THAT SO LONG AS THE VRS COMPENSATION RECEIVED BY AN ASSESSEE DOES NOT EXCEE D EITHER OF THE TWO LIMITS PRESCRIBED UNDER RULE 2BA THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10(10C) OF THE ACT. (A) ARUN KUMAR T MAKWANA VS. ITO (2006) 204 CTR (G UJ) 433 (B) SAIL DSP VR EMPLOYEES ASSOCIATION 1998 V UNION OF INDIA AND OTHERS (2003) (262 ITR 638 (CAL.)) 5. WE HAVE HEARD THE PARTIES AND CAREFULLY GONE THROUGH BOTH THE CASE LAW. IN THE SECOND CITED CASE IT WAS HELD THAT THE PAYMENT MADE FOR VOLUNTARY SEPARATION WOULD QUALIFY FOR EXEMPTION U/S 10(10C) EVEN IF THE SAME IS PAID IN 3 INSTALMENTS. IN THE INSTANT CASE THE ISSUE IS TOT ALLY DIFFERENCE AND HENCE THE SAID CASE LAW IS NOT APPLICABLE HERE. 5.1 IN THE FIRST CITED CASE IT WAS HELD BY THE HONBLE GUJARAT HIGH COURT THAT THE AMOUNT OF COMPENSATION SHOULD NOT EXCEED EITHER OF THE TWO LIMITS PRESCRIBED UNDER RULE 2BA. THE MODALITIES OF CALCULATION OF T HE VRS NEED NOT BE LOOKED INTO. THE RELEVANT OBSERVATIONS OF THE HIGH COURT ARE EXTRACTED BELOW: WHILE DETERMINING THE QUESTION WHETHER THE VRS FR AMED BY THE RELIANCE INDUSTRIES LTD CONFORMS TO THE GUIDELINES PRESCRIB ED BY R. 2BA OF THE RULES WHAT IS REQUIRED TO BE TAKEN INTO CONSIDERATION IS WHETH ER THE AMOUNT RECEIVABLE ON ACCOUNT OF VOLUNTARY RETIREMENT EXCEEDS THE AMOUNT EQUIVALENT TO . (1) THREE MONTHS SALARY FOR EACH COMPLET ED YEAR OF SERVICE; OR (2) SALARY AT THE TIME OF RETIREMENT MULTIPLIED BY THE BALANCE MONTHS OF SERVICE LEFT BEFORE THE DATE OF HIS RETIREMENT ON S UPERANNUATION. . THE PAYMENT OF AMOUNT CONTEMPLATED UNDER VRS FRAMED BY THE RELIANCE INDUSTRIES LTD DOES NOT EXCEED THE AMOUNT EQUIVALENT TO (1) THREE MONTHS SALARY FOR EACH COMPLETED YEAR OF SERVICE OR (2) SA LARY AT THE TIME OF RETIREMENT MULTIPLIED BY THE BALANCE MONTHS OF SERVICE LEFT BE FORE THE DATE OF HIS RETIREMENT ON SUPERANNUATION. ACCORDING TO THIS DECISION SO LONG AS THE VRS CO MPENSATION DOES NOT EXCEED EITHER OF THE TWO LIMITS PRESCRIBED UNDER RULE 2BA THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10(10C) OF THE ACT. THE MODALITIES O F CALCULATION OF THE COMPENSATION ARE NOT RELEVANT. 5.2 THE LD AR HAS FILED A WORKING SHEET IN THE PAPER BOOK COMPILED BY HIM AND WHICH ARE PLACED IN PAGE NO.1 AND 2. ACCORDING TO LD AR THE LIMITS PRESCRIBED UNDER RULE 2BA WORKS OUT AS UNDER: (A) THREE MONTHS SALARY FOR EACH COMPLETED YEAR OF SERVICE - RS.17 48 288/- (B) ONE MONTH SALARY FOR EACH MONTH OF BALANCE OF SERVICE LEFT - RS. 7 42 051/- (C) ACTUAL COMPENSATION RECEIVED ON VOLUNTARY RET IREMENT - RS.14 26 095/- (INCLUSIVE OF SOME OTHER PAYMENT) 4 ACCORDING TO LD AR THE COMPENSATION AMOUNT RECEIVED IS LESS THAN THE AMOUNT OF RS.17 48 288/- PRESCRIBED UNDER RULE 2BA AND HEN CE EXEMPTION OF RS.5.00 LAKHS PRESCRIBED UNDER SECTION 10(10C) IS APPLICABL E TO THE ASSESSEE. 5.3 IN VIEW OF THE DECISION OF HONBLE GUJARAT H IGH COURT IN THE CASE OF ARUN KUMAR T MAKHWANA SUPRA WE AGREE WITH THE CONTENT IONS OF LD AR. HOWEVER THE WORKINGS GIVEN BY LD AR WHICH IS REPRODUCED IN PARA 5.2 SUPRA NEEDS VERIFICATION. HENCE WE SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY THE COMPUTATIONS MADE BY THE ASSESSEE AND AL LOW THE EXEMPTION PROVIDED U/S 10(10C) OF THE ACT IF THE VOLUNTARY RETIREMENT COMPENSATION RECEIVED BY THE ASSESSEE IS LESS THAN EITHER OF THE TWO MONETARY LI MITS PRESCRIBED UNDER RULE 2BA. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 02-03-2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 2 ND MARCH 2010. A COPY OF THIS ORDER IS FORWARDED TO : 01 THE ACIT CIRCLE-2(1) VISAKHAPATNAM 02 SRI L. BRAHMAM 53-17-52/1 MADDILAPALEM VISAKH APATNAM 03 THE CIT (A)-II VISAKHAPATNAM 04 THE CIT VISAKHAPATNAM 05 THE DR ITAT VISAKHAPAATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT VISAKHAPATNAM BENCH