K.R. Alagappan and Others vs Assistant Commissioner of Income Tax

R.S. Ramanathan, J.—Heard both sides.

The Petitioners, in all these writ petitions, were employees of ICICI Bank and they are also Assessees under the Income Tax Act. The ICICI Bank introduced earlier retirement option, which is Voluntary Retirement Scheme and under the scheme, the Petitioners opted to retire and received the terminal benefits. The Petitioners filed their original return u/s 139 of the Income Tax Act in time and also filed a revised return pursuant to the intimation u/s 143 of the Income Tax Act. The Income Tax Assessment Officer granted the relief to the Petitioners u/s 89(1) of the Income Tax Act and did not deal with the exemption u/s 10(10C) of the Act. According to the Petitioners, as per Section 10(10C) of the Income Tax Act, any amount received by the employee on his Voluntary Retirement Scheme not exceeding Rs. 5 lacs is exempted from the Income. The employees are also entitled to take the benefits as per Section 89 of the Act. As the terminal benefits received by the Petitioners upon the Voluntary Retirement exceeds Rs. 5 lacs income cannot be levied on the amount of Rs. 5 lacs as per Section 10(10C) of the Act and while passing orders on the assessment of the Petitioners, this was not taken notice by the Income Tax Authorities and the tax was assessed on Rs. 5 lacs. Therefore, the Petitioners filed applications u/s 154 of the Act for rectifying the mistake apparent in the assessment order made u/s 143(3) of the Income Tax Act, for not involving Section 10(10C) as per the order of the Income Tax Tribunal. These applications were rejected by the Respondent on the ground that there is no mistake apparent from the records and the points raised by the Petitioners is a debatable one. These orders passed by the Respondent are challenged in these writ petitions.

The Respondent filed a counter, in all the writ petitions, stating that the Petitioners are not entitled to exemption on the amount of Rs. 5 lacs received under Voluntary Retirement Scheme as per Section 10(10C) of the Income Tax Act and therefore, they were not granted exemption under that provision. It is further stated that the rectification application was rejected as the issue involved is a debatable one on which two opinions are possible and therefore, it is not a mistake apparent from the records and it requires elaborate argument. It is, therefore, stated that even if it is a mistake, which requires a complicated process of investigation, argument or proof , it cannot be recorded as mistake apparent from the records and therefore, it was rightly rejected. It is further stated that the Petitioners are also not entitled to claim exemption to an extent of Rs. 5 lacs u/s 10(10C) of the Income Tax Act.

Mr. S.M.S. Johny Basha, the learned Counsel appearing for the Petitioner, in all the writ petitions, submitted that initially exemption was not granted u/s 10(10C) of the Act and this Court has also held in the matter of Commissioner of Income Tax and Ors. v. M. Chelladurai and others that the amount received on voluntary retirement of service by people like the Petitioners are not eligible for exemption u/s 10(10C) of the Income Tax Act, unless the Voluntary Retirement Scheme confirmed to the guideline laid down u/s 10(10C) and Rule 2B(a) and the Voluntary Retirement Scheme formulated by ICICI Bank was only a soft exit option for employees and therefore, these amounts are not eligible for exemption but later the judgment of this Honourable Court rendered by the Division Bench of this Court reported in Commissioner of Income Tax Vs. M. Chelladurai and Others, , was set aside by the Honourable Supreme Court in Civil Appeal Nos. 6997-7002 of 2009 in the case of Chandra Ranganathan and Ors. v. Commissioner of Income Tax, Chennai and the Honourable Supreme Court relying upon the circular issued by the Commissioner of Income Tax held that the amount received by the employee under Voluntary Retirement Scheme, are eligible for exemption u/s 10(10C) of the Income Tax Act. Therefore, the learned Counsel appearing for the Petitioners submitted that the matter has been finally decided by the Honourable Supreme Court and even though, the Honourable Supreme Court has not rendered judgment, setting aside the order of the Division Bench of this Court reported in Commissioner of Income Tax Vs. M. Chelladurai and Others, , at the time of passing of the order, which are impugned in these writ petitions, having regard to the subsequent judgment of the Honourable Supreme Court, the impugned orders are liable to be set aside and the Petitioners are entitled to get the benefits of exemption u/s 10(10C) of the Income Tax Act. In other words, the learned Counsel appearing for the Petitioners submitted that though the Respondent was right in holding that the issue was debatable one, having regard to the subsequent judgment rendered by the Honourable Supreme Court on this aspect, the writ petitions are liable to be allowed.

Mr. R. Sathiamoorthy, the learned Standing counsel appearing for the Respondent submitted that the Petitioners filed rectification applications and it is like a review application and unless the errors are apparent on the face of the record, the rectification applications cannot be entertained and while passing the order rejecting the application filed by the Petitioners, the assessment order was in accordance with law and the Petitioners were not entitled to claim exemption u/s 10(10C) of the Income Tax Act and in that context only, applications were rejected as there is error apparent on the fact of the record. The learned Standing Counsel appearing for the Respondent, therefore, submitted that the orders need not be interfered with on the basis of the subsequent judgment rendered by the Honourable Supreme Court.

6.I have given my anxious consideration to the submission made by both the counsels.

In this case, it is admitted that there were conflict of views regarding the exemption to be granted u/s 10(10C) of the Income Tax Act in respect of the amounts received under the Voluntary Retirement Scheme and therefore, while passing order u/s 143 of the Income Tax Act, the Income Tax Officer did not deal with the Section 10(10C) of the Act regarding exemption and as rightly pointed by the learned Counsel appearing for the Petitioners as well as the learned Standing Counsel appearing for the Respondent that the Division Bench of this Court also held in the judgment reported in Commissioner of Income Tax Vs. M. Chelladurai and Others, referred to above held that exemption u/s 10(10C) of the Act cannot be claimed by the employees of ICICI Bank, who opted to retire under Voluntary Retirement Scheme of that bank. Therefore, the Respondent was right in rejecting the application for rectification on the ground that there is no error apparent on the face of the record and it is debatable one. However, having regard to the subsequent development viz., the judgment delivered by the Honourable Supreme Court in the Civil Appeal Nos. 6997 to 7002 of 2009, which were against the order of the Division Bench of this Court referred to above, the Honourable Supreme Court held that the Assessees are entitled to claim exemption u/s 10(10C) of the Act. Hence, the matter has been finally decided by the Honourable Supreme Court and therefore, the Assessees viz, the Petitioners herein, are entitled to claim exemption u/s 10(10C) of the Income Tax Act and therefore, the order of the Respondent, rejecting the applications for rectification of the assessment order is set aside.

In the result, the all writ petitions are allowed and the Respondent is directed to grant exemption u/s of the 10(10C) of the Income Tax Act to the Petitioners on the basis of the Honourable Supreme Court judgment referred to above and pass orders within a period of 12 weeks from the date of receipt of copy of this order. No costs.