The Commissioner of Income Tax vs M. Abdul Kareem

K. Raviraja Pandian, J.—This Tax Case Appeal has been filed by the Revenue against the order of the Income Tax Appellate Tribunal, C

Bench, Chennai dated 30.12.2005 made in I.T.A. No. 776/Mds/2004 for the assessment year 2001-02. The substantial question of law

formulated for entertainment of the appeal is as follows:

Whether in the facts and circumstances of the case, the Tribunal was right in holding that the assessee is eligible to claim simultaneous benefit u/s

10(10C) as well as Section 89(1) in respect of the compensation received under the voluntary retirement scheme ?

The issue relates to the assessment year 2001-2002. The assessee was an employee of Canara Bank. During the previous year relevant to the

assessment year 2001-2002, the assessee retired from service from the Bank under the voluntary retirement scheme. On retirement, the assessee

received from the employer bank several retirement dues including exgratia. The exgratia had been worked out by the employer at 60 days salary

for each completed year of service or salary for the number of months of service left, which ever was less. Out of the exgratia thus received, the

assessee claimed exemption of Rs. 5 lakhs. As per the provisions of Section 10(10C) of the Act, the balance exgratia was admitted as income.

However, while working out the tax payable on such income, the assessee claimed relief u/s 89(1).

The assessing officer rejected the claim of the assessee for the relief u/s 89(1) of the Act and completed the assessment by granting exemption

u/s 10(10C) of the Act. Aggrieved over the same, the assessee preferred appeal before the Commissioner of Income Tax (Appeals), which appeal

was allowed by the Commissioner of Income Tax (Appeals). Questioning the correctness of the order of the Commissioner of Income Tax

(Appeals), the revenue preferred further appeal before the Income Tax Appellate tribunal and the Tribunal dismissed the appeal preferred by the

revenue. Aggrieved by the order of the Income Tax Appellate Tribunal, the revenue filed the present appeal u/s 260A oft he Income Tax Act,

1961.

The core contention in the appeal on behalf of the revenue is that the order of the Tribunal holding that the assessee is eligible to claim relief both

u/s 10(10C) and 89(1) simultaneously cannot be legally sustainable. When a specific provision has been introduced for grant of exemption of the

amounts received under the voluntary retirement scheme, it would no longer be available to the assessee to seek to go under the General Clauses

for the amount in excess of the exemption granted. The said provision Section 10(10C) has been introduced only for the benefit of the assessee

who opts for voluntary retirement. If the assessee merely sought to treat income as salary, then the only benefit available is u/s 89(1). Then, the

assessee would have to pay more amount by way of tax. Section 89(1) provides, where an assessee is in receipt of a sum in the nature of salary,

being paid in any financial year of salary for more than twelve months or a payment which under the provisions of Clause (3) of Section 17 is a

profit in lieu of salary, his income is assessed at a higher rate than that at which it would otherwise have been assessed. In view of the above

provision, the order of the Tribunal granting the relief to the assessee both u/s 10(1)(C) and 89(1) of the Act cannot be legally sustainable.

The very issue as to the correctness of granting the relief under Sections 10(10C) and 89(1) to assessee, who voluntarily retired from service,

was the subject matter of consideration before the Division Bench of this Court in the case of Commissioner of Income Tax Vs. G.V. Venugopal, .

In that case, the Division Bench has held that the notions of equity do not apply in taxing statutes. If the assessee is entitled to two different benefits

on the plain language of the statute, he has to be granted both those benefits. There are several provisions granting twin or double benefits, while in

other provisions, twin or double benefit has been specifically prohibited. There is no prohibition to the twin benefit in respect of the amount

received under the voluntary retirement scheme. The relief contemplated u/s 89(1) of the Act is aimed to mitigate the hardship that may be caused

on account of the high incidence of tax due to progressive increase in tax rates and thus held that the benefit under Sections 10(CC) and 89(1)

could be granted to the assessees. The judgment squarely answers the issue. Hence, the appeal is dismissed.