Chandra Ranganathan and Others vs Commissioner of Income Tax

Leave granted.

These appeals are directed against the order passed by the Madras High Court in several tax appeal cases where the question involved was with regard to the deduction available to the Appellants u/s 10(10C) of the Income Tax Act, 1961. The order of the Commissioner (Appeals)-IV, Chennai, relating to the assessment year 2004-05, was questioned before the Income Tax Appellate Tribunal, Chennai Bench, in I. T. A. No. 986 (Mds)/2007, and other connected appeals, which were disposed of by the Tribunal upholding the claim for deduction made by the Appellants. The same was the subject matter of the tax appeal cases before the Bombay High Court, which refers to the order of the Appellate Tribunal on the basis of letter F. No. 225/74/2005-ITA-II dated 20-10-2005, of the Central Board of Direct Taxes so far as the Reserve bank of India is concerned. The High Court held that having regard to the above letter of the Central Board of Direct Taxes, the amount received by the employees of the RBI opting for Optional Early Retirement Scheme do not qualify for deduction u/s 10(10C) of the aforesaid Act.

During the course of hearing of these appeals, it was brought to our notice that by the subsequent letter dated 8-5-2009, issued by the Central Board of Direct Taxes, it was indicated that the matter had been reviewed on the basis of the judgment of the Bombay High Court dated 4-7-2008, in the case of CIT V. Koodathil kallyatan Ambujakshan (2008) 219 CTR (Bom) 80 : (2008) 12 DTR 138 and it was held that amounts received by retiring employees of the RBI would be eligible for exemption under the aforesaid provisions of the Income Tax Act. On behalf of the Union of India and the Commissioner of income tax, the Respondent herein, it was submitted that in view of the said circular, the Respondent would allow the benefit of deduction to the Appellants u/s 10(10C) of the Income Tax Act, 1961, as far as the retired employees of the Reserve bank of India are concerned.

Having regard to the above, the appeals succeed and are allowed. The impugned order passed by the High Court is set aside and that of the Tribunal is restored. There will be no order as to costs.