Income Tax Appellate Tribunal - Lucknow
Anant Kumar Agarwal vs Income Tax Officer on 12 December, 2007
Equivalent citations: [2008]113ITD1(LUCK), [2008]302ITR49(LUCK), (2008)114TTJ(LUCK)67
ORDER
B.R. Mittal, J.M.
1. The assessee has filed this appeal for asst. yr. 2004-05 against the order of the CIT(A) dt. 17th Feb., 2006.
2. The only issue involved in this appeal is as to whether on the facts and in the circumstances of the case, the assessee is entitled for exemption under Section 10(10C) of the Act amounting to Rs. 5 lakhs out of sum of Rs. 13,52,784 received by the assessee on voluntary retirement from the services of RBI.
3. The relevant facts are that assessee is an employee of RBI. The RBI announced VRS known as Optional Employees Retirement Scheme (hereinafter to be referred in short as OERS). During the year, the assessee opted for OERS. The assessee received a sum of Rs. 13,52,784 from RBI under the said OERS. The assessee filed return of income claiming exemption of Rs. 5 lakhs as per provisions of Section 10(10C) of the Act. The AO did not accept the said claim of the assessee on the ground that RBI itself vide its letter dt. 31st Aug., 2005, a copy of which is placed at pp. 11 to 13 of the paper book, confirmed that the said scheme of early retirement did not fulfil guidelines laid down in Rule 2BA of the IT Rules and as such amount of ex gratia paid under the scheme, i.e., OERS was subject to deduction of tax. It is relevant to state that exemption under Section 10(10C) of the Act of Rs. 5 lakhs is available only if the scheme is covered under Section 10(10C) of the Act r/w Rule 2BA of the IT Rules.. In view of the above fact that OERS of RBI under which assessee opted voluntary retirement did not fulfil the requirements of provisions of Section 10(10C) of the Act r/w Rule 2BA of the IT Rules, 1962, the AO did not allow exemption of Rs. 5 lakhs to the assessee and added the same to his income under Section 17(3) of the Act. The assessee filed appeal before the first appellate authority.
4. The learned CIT(A) has also confirmed the action of the AO in denying claim of exemption under Section 10(10C) of the Act to the assessee. Hence the assessee is in further appeal before the Tribunal.
5. During the course of hearing, the learned Authorised Representative of the assessee submitted that basic idea of bringing scheme by the RBI is to reduce number of its staff to make undertaking economically viable. He submitted that about 4,000 employees of RBI opted this OERS and it resulted reduction in total number of staff strength. He further submitted that RBI had written letter dt. 31st Aug., 2005 that its scheme of early retirement did not fulfil guidelines laid down in Rule 2BA of the IT Rules on the basis of opinion received from M/s Choksi & Co. chartered accountants. He submitted that OERS of RBI substantially fulfilled the requirements of Rule 2BA of IT Rules and further it is only guidelines provided and is not substantive and binding in nature. The learned Authorised Representative of the assessee submitted that provision of Section 10(10C) of the Act is a beneficial provision granting exemption to the employees who have opted voluntary retirement and it should be interpreted in a liberal manner. In support of his submission, the learned Authorised Representative of the assessee placed reliance on the decision of the Hon'ble Kerala High Court in the case of P. Alikunju, M.A. Nazeer Cashew Industries v. CAT and the decision of the apex Court in the case of CAT v. Vegetable Products Ltd. and also the decision of the apex Court in the case of Bqjqj Tempo Ltd. v. CIT . He submitted that assessee is entitled for exemption of Rs. 5 lakhs out of sum received by the assessee on opting voluntary retirement scheme of RBI.
6. On the other hand, the learned Departmental Representative supported the orders of the authorities below. He submitted that RBI has itself confirmed to the AO vide its letter dt. 31st Aug., 2005 in reply to a letter written by the AO that its scheme of early retirement did not fulfil guidelines laid down in Rule 2BA of IT Rules and as such amount of payment made under the scheme was subject to deduction of tax. The learned Departmental Representative submitted that Section 10(10C) of the Act specifically provides that exemption will be available to an employee not exceeding Rs. 5 lakhs only if the scheme is in accordance with such guidelines as may be prescribed. He submitted that Rule 2BA of the IT Rules provides guidelines for the purpose of Section 10(10C) of the Act. Me submitted that the said guidelines are statutory in nature and they are binding while allowing exemption under Section 10(10C) of the Act. The learned Departmental Representative further submitted that cases relied upon by the learned Authorised Representative of the assessee (cited supra) are not applicable to the facts of the case as in those cases there was issue regarding interpretation of taxing provision and in that context it was held by the apex Court/Hon'ble Kerala High Court that provision inserted for promoting economic growth granting incentives has to be interpreted liberally so as to advance objective of the provision and not to frustrate it. The learned Departmental Representative submitted that there is no ambiguity in the guidelines as provided under Rule 2BA of IT Rules for allowing exemption under Section 10(10C) of the Act, the question of ambiguity does not arise and hence the said cases as cited by the learned Authorised Representative of the assessee are not relevant.
7. We have carefully considered the submissions of the learned Departmental Representatives of the parties and the orders of the authorities below. We have also considered relevant provisions of the IT Act, 1961 specially Section 10(10C) of the Act and Rule 2BA of the IT Rules and have also perused cases cited by the learned Authorised Representative of the assessee. At the outset, we agree with the learned Departmental Representative that cases cited by the learned Authorised Representative of the assessee (supra) are not relevant to the facts of the case before us. There is no dispute to the fact that there is no ambiguity in the provisions of Section 10(10C) of the Act as well as in Rule 2BA of IT Rules. There is no dispute that if there is no ambiguity, it is a cardinal principle of interpretation of a statute that words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary. Since provisions of Section 10(10C) of the Act r/w Rule 2BA of IT Rules specifically provide that exemption under Section 10(10C) of the Act is available of an amount not exceeding Rs. 5 lakhs received under a VRS provided said scheme is in accordance with the guidelines as may be prescribed. The said guidelines are prescribed under Rule 2BA of IT Rules. Since there is no ambiguity in reading the provision of Section 10(10C) of the Act and also Rule 2BA of IT Rules, we hold that we have to construe said provision in its intend and purposes. The apex Court has held in the case of R.B. Jodha Mal Kuthiala v. CIT that equitable constructions are irrelevant in interpreting lax laws. They are to be interpreted reasonably and in consonance with justice. One has to look fairly at the language used. Rowlatt J. in Cape Brandy Syndicate v. IRC (1921) 1 KB 64 at p. 71 stated about rule of construction of a taxing statute as under:
In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.
The apex Court has also held in the case of CIT v. Vadilal Lxillubhai that in interpreting a taxing provision, one has merely to look to the words of the provision. The Hon'ble Madras High Court has held in the case of Venkateshwara Stainless Steel & Wire Industries v. Union of India (1987) Tax LR 1915 (Mad) that no tax can be imposed or excluded by analogy.
Therefore, we do not accept the contention of the assessee that denial of exemption of Rs. 5 lakhs to the assessee will cause hardship to the assessee as the assessee has opted retirement under the scheme of RBI. Now we look into the facts as to whether the scheme of RBI viz. OERS fulfils the guidelines laid down in Rule 2BA of IT Rules. We observe that the RBI vide its letter dt. 31st Aug., 2005 has itself stated that the ex gratia amount paid under its OERS scheme does not qualify for exemption under Section 10(10C) of the Act as its OERS is not in the nature of voluntary retirement as per guidelines in Rule 2BA of the IT Rules. The learned CIT(A) has also reproduced relevant extract of the said letter dt. 31st Aug., 2005 received from RBI in para 6 at pp. 4 and 5 of the paper book which reads as under:
The bank's OERS did not fulfil the guidelines laid down in Rule 2BA of IT Rules and hence the amount of ex gratia paid under the scheme was subject to deduction of tax thereon at source and the same was deducted accordingly as per terms and scheme (please see el. 6 of the scheme enclosed to A.C. No. 1). Further, the ex gratia paid under the scheme does not qualify for the exemption under Section 10(10C) of IT Act for the following reasons:
(a) Clause (i) of Rule 2BA states that the scheme should be applicable to the employees who have completed ten years of service or 40 years of age whereas the bank's OERS was applicable to employees of the bank who had completed minimum 25 years of age [please see para 3(b) of A.C. No. 1].
(b) Clause (iii) of Rule 2BA provides that the scheme should have been framed in order to result in overall reduction in the existing strength of employees. Bank's OERS has not been framed for that purpose but for providing to the bank's staff some alternative optional facilities to pursue other interest actively (please see para 1 of A.C. No. 1 dt. 11th Aug., 2003).
(c) Clause (iv) of Rule 2BA provides that the vacancy caused by voluntary retirement is not to be filled up. Bank has not bound itself not to fill up vacancies arising out of OERS. It is open to the bank to make need based recruitment against such vacancies if and when considered appropriate by the bank.
(d) The scheme introduced by the bank was not in the nature of voluntary retirement scheme as per the guidelines laid down in Rule 2BA of the IT Rules. In view of the differences between the bank's OERS and the guidelines laid down in Rule 2BA of the IT Rules, the ex gratia paid under bank's scheme does not qualify for exemption under Section 10(10C) of the IT Act. As such bank has not allowed the exemption under Section 10(10C) of the IT Act, 1961, at the time of issuing Form No. 16 pertaining to asst. yr. 2004-05, to the employees who had opted for OERS. The same is in accordance with the provisions of IT Act and IT Rules.
8. In view of the above, we agree with the learned CIT(A) that as long as conditions as laid down in Rule 2BA of IT Rules r/w Section 10(I0C) of the Act are not fulfilled, the assessee is not entitled for exemption under Section 10(10C) of the Act. Hence, we uphold the order of the learned CIT(A) by rejecting ground of appeal taken by the assessee.
9. In the result, appeal of the assessee is dismissed.
S.V. Mehrotra, A.M. : 20th Nov., 2006
1. I have gone through the order of the learned Brother and have also discussed the issue with him, but am not able to persuade myself to agree with the view taken by him.
2. The facts have been stated by the learned JM and therefore, do not require any further elaboration. The issue is whether assessee was entitled for exemption under Section 10(10C) of the Act amounting to Rs. 5 lakhs or not. The denial of exemption by both the lower Revenue authorities as well as by the learned JM is on the ground that the Optional Employees Retirement Scheme (OERS) framed by the RBI was not in accordance with the requirements of Rule 2BA of the IT Rules as was confirmed by the RBI itself. The AO has primarily held that the (iii) and (iv) requirements of Rule 2BA had not been fulfilled. The (iii) and (iv) requirements of Rule 2BA are as under:
(iii) the scheme of voluntary retirement or voluntary separation has been drawn to result in overall reduction in the existing strength of the employees.
(iv) the vacancy caused by the voluntary retirement or voluntary separation is not to be filled up;
3. In the present case, the entire thrust is on the issue whether the scheme framed by the RBI was in consonance with the guidelines laid down in Rule 2BA or not. While considering the issue whether the scheme framed by the RBI conforms to the guidelines laid down under Rule 2BA or not, we have to take into consideration the context of the scheme, Section 10(K)C as a whole and its purposes before coming to any conclusion. If the scheme substantially fulfils the requirement of Rule 2BA of the IT Rules then merely because RBI on the basis of opinion of M/s Choksi & Co., chartered accountants, stated that the scheme was not in conformity with the requirements of Rule 2BA, itself cannot be the sole criteria for denying the benefit to assessee. At this juncture I may point out. that the RBI had taken the opinion of M/s Choksi & Co. regarding deduction of tax at source and in that context they opined that the scheme framed by the RBI did not conform to the requirements laid down under Rule 2BA. The obligation of TDS is on employer and therefore, in order to ensure that there is no non-compliance with the provisions of IT Act, the employer/deductor of tax plays safe and if there is any doubt about taxability, normally deduct the tax at source, which assessee can subsequently claim in its return of income as refund. Therefore, RBI's letter dt. 31st Aug., 2005, in my humble opinion, cannot be the basis for denying the assessee's claim. In this regard, I may also refer to the decision of the Hon'ble Calcutta High Court in the ease of Sail DSP VR Employees Association 1998 v. Union of India and Ors. (2003) 181 CTR (Cal) 367 : (2003) 262 1TR 638 (Cal), wherein (at p. 647) it has been observed as under:
No estoppel in law:
The question of estoppel because of option exercised with eyes open to the subsequent modification cannot be sustained. What is not otherwise taxable cannot become taxable because of admission of the assessee. Nor can there be any waiver of the right otherwise admissible to the assessee in law. The chargeability is not dependent on the admission of or waiver by the assessee. Chargeability is dependent on the charging section, which needs to be strictly construed. Referring to the decision in CAT v. Bhaskar Mitter (1994) 73 Taxman 437, 442 (Cal) (para 8), we had occasion to so hold in the decision in Mayank Poddar (HUF) v. WTO (IT Appeal No. 84 of 1999, dt. 24th Feb., 2003 (sic).
4. The learned Counsel has relied on the following documents to submit that the RBI's scheme substantially complied with the requirements of Rule 2BA:
1. Copy of the extract from OERS analysis as issued by RBI (OERS Special Issue/2004)
2. Copy of the extract from the annual report of RBI from the chapter Human Resources Development and Organizational matters p. 101/102/103.
5. In this regard, the learned Counsel has also referred to the order of the CIT(A)-XIV, Kolkata, dt. 12th Aug., 2005 in the appeals filed by 465 ex employees of RBI as contained at pp. 33 to 78 of the paper book, wherein similar issue was involved and same scheme was considered by the learned CIT(A), who after considering the detailed submissions of the learned Counsel, held that the scheme framed by the RBI was in conformity with the requirements of Rule 2BA.
6. I reproduce the extracts from para 8 of the above order which are relevant in the present case:
A. Statutory guidelines Rule 2BA(iii):
The scheme of voluntary retirement or voluntary separation has been drawn to result in overall reduction in the existing strength of the employees.
B. AO/RBI's contention:
Administrative Circular No. 1dt. 11th Aug., 2003 of the RBI makes it clear that OERS is not a scheme drawn up for overall reduction in the existing strength of the employees. The OERS is a negotiated document to assist such employees who wished to have a retirement opportunity at their discretion which provided them with additional benefits so that they can pursue their interests actively.
C. Authorised Representative's contention:
(i) Authorised Representative Sri A.K. Ghosh, submitted that entire observations of the learned ITO is based on some assumption which has no nexus with the terms and conditions as stated in the said circular and nowhere in it has been stated by the RBI that OERS is not a scheme drawn up for overall reduction in the existing strength of the employees. Authorised Representative referred to the appropriate part of the abovesaid administrative circular which indicated that "the bank intends, to control the outflow according to its requirements and towards this end, the bank retains the discretion to limit the number of employees allowed to retire in each category of staff to be covered under the OERS. The bank will have the absolute discretion as to the acceptance or non-acceptance of an officer's/employee's application for retirement under OERS depending upon the requirements of the bank". Authorised Representative also pointed out to the views expressed in in house newsletters after implementation of the OERS wherein Reserve Bank authorities claimed substantial reduction in its staff strength by a large number of 4468. Authorised Representative supported the above claim through the statistical data issued by HR Department in the newsletter of RBI which is also confirmed in its annual report for 2003-04 on p. 202. Authorised Representative submitted that newsletters were very much the property of RBI and there is no scope of disowning the same or disclaim the number of employees as stated in the said letter, as the newsletters are published by the press relation division of RBI. My attention was also drawn to newsletter Vol. 29, No. 9 dt. 15th Nov., 2003 wherein it has been particularly stated by the authorities that "the introduction of the OERS and the consequent reduction in the staff strength has thrown up new challenges" and the Regional Offices/Central Office have to embark on work process reengineering and job realignment to cope up with the situation in post OERS scenario. It is claimed that OERS confirms to the Rule 2BA(iii). Reliance was also placed on the submission to the effect that OERS in no way has any conflict with guidelines in Sub-rule (iii) of Rule 2BA under IT Rules, 1962.
(ii) Authorised Representative Sri S.K. Chatterjee/T.K. Mitra, submitted that the real purpose behind the introduction of such a scheme involving early retirement in the present economic scenario is always to cause reduction in the staff strength irrespective of the language used for such retirement/separation in the related documents as no organization would offer voluntary retirement to its own staff if the employees were really needed in the organization. The Authorised Representative also referred to the newsletter of RBI indicating OERS leading to reduction by 4,468 in the strength of the work force. It was also indicated that optees were mostly close to the retirement age. The Authorised Representative also submitted that an analysis in the in-house newsletter mentioned "the RBI was probably the last institution among the public sector banks to jump into the fray for introduction of its eagerly awaited VRS for its employees". The Authorised Representative submitted that the above clearly indicates that even the RBI took this OERS as VRS only for some unknown reasons preferred to have a different nomenclature in the related papers. It was claimed that there is no dispute about the overall reduction in the existing strength of the employees which clearly meant that the condition in Clause (iii) of Rule 2BA was fully satisfied.
(iii) Sri Soumitra Chaudhury, Authorised Representative of the remaining appellants pleaded that AO's observations in the remand report regarding OERS being not a scheme drawn up for overall reduction in existing strength of the employees was completely baseless and as would be evident from the annual report of RBI for 2003-04 at p. 201, it has been clearly stated that the bank had to have technical upgradation towards streamlining the work in its general and core function. It was claimed that under OERS, 4,468 officers/employees have retired all over India and the manpower strength has come down by this number in the RBI. Authorised Representative, therefore, claimed that comment of the AO in regard to Rule 2BA(iii) was without any basis and factually wrong.
D. Conclusion:
On careful perusal of AO's comments, in my view the OERS though uses a different phraseology, the tenor of the scheme shows that it has been drawn up only to reduce the number of existing workforce in the RBI. In the present times for fear of adverse comments, organizations/unions avoid indicating a scheme expressly to be for retiring the working staff or cutting down the number of personnel. RBI has also christened the scheme as "Optional Early Retirement Scheme;" which among its implied objectives is the reduction of manpower. In fact the annual reports and newsletters of RBI have been repeatedly highlighting the resultant reduction of workforce pursuant to the introduction of OERS. In my view, therefore, guideline in Rule 2BA(iii) is broadly complied by the OERS of RBI.
A. Statutory guidelines Rule 2BA(iv):
The vacancy caused by the voluntary retirement or voluntary separation is not to be filled up.
B. AO/RBI's contention:
The RBI has informed that it has not bound itself not to fill up the vacancies arising out of OERS. The bank reserves the right to make need based recruitment against such vacancies.
C. Authorised Representative's comments:
(i) Sri A.K. Ghosh, Authorised Representative, pleaded that under sub-Rule (iv) of Rule 2BA it was not mandatory that the employer shall have to bound itself not to fill up the vacancy at any time in future. It merely meant that there should not be any scheme at the time of allowing retirement to bring in replacements either simultaneously or immediately thereafter. There could not be a permanent bar on recruitment. The condition only means that there shall not be the provision for inbuilt for replacements at the time of framing the scheme of VRS. The situation may change after the optees are retired and in new situation at distant future organisation may require filling up of some of the posts by fresh recruitments. In the above circumstances since OERS did not provide for recruitment either simultaneously or immediately thereafter, the vacancies of employees exercising their option under OERS were not to be filled up at the time of voluntary retirement. In his view therefore, terms of OERS are not in violation of the Rule 2BA(iv).
(ii) Sri S.K. Chatterjee/T.K. Mitra, Authorised Representatives, submitted that AO had not supplied the appellant a copy of RBI's letter relied upon by him. either at the time of assessment or afterwards. It was clear from the remarks of the AO that the RBI has not specifically stated whether it has made recruitment to the posts which have fallen vacant due to OERS. There was no material on record to show that all or majority of vacancies caused by voluntary retirement under OERS have been filled up by the RBI . In the Authorised Representative's opinion, RBI's assertion of its right to make need based recruitment against such vacancies in future does not answer the question specifically and cannot be taken as reasonable basis for AO to hold that conditions in Rule 2BA(iv) was not fulfilled. It was claimed that the reply of the RBI as mentioned by the AO, is vague, evasive and not to the point. Even if there is some need based recruitment sometime after the retirement, it would not disentitle the employees from satisfying the condition provided in Rule 2BA(iv).
(iii) Sri S. Chaudhury, Authorised Representative, pleaded strongly against the AO's claim about RBI not binding itself to fill up the vacancy. Authorised Representative brought to my notice the categoric statement in RBI's annual report for 2003-04 on p. 203, para 14.3 that in order to overcome the challenges posed by the OERS in managing the work of the Reserve Bank, a committee on job realignment/consolidation was constituted under the Chairmanship of Sri A.V. Sardesai, Executive Director who after conducting a survey submitted its report. It was claimed that staff strength as on 31st Dec., 2002 was 28,884 and that on 30th June, 2003 was 28,254. Therefore, 630 employees had already retired even before OERS scheme came into effect from 1st of August, 2003 and in place of them only 127 employees were recruited throughout the year. Nowhere in the annual report Authorised Representative claimed that RBI has stated that they have filled up the 4,468 OERS vacancies with newly recruited employees. It was pointed out that OERS was effective from 1st of August, 2003 and actual vacancies arose much later after acceptance of the optee's application but the bank filled only 127 posts during the entire period of January, 2003 to December, 2003. These recruitments,, therefore, could not be said to be against the posts vacated by the employees opting for OERS as after posts got vacated, recruitment process starting with advertising the vacancies, calling applications, scrutinizing the same for short listing etc., conducting interviews/selection tests and offering appointments would not be possible in so short a duration after OERS vacancies actually arose. It was therefore, pleaded that Rule 2BA(iv) has not been violated by the OERS scheme of RBI and the allegation by the AO in the remand report was totally misguided and false.
D. Conclusion:
The requirement of vacancy caused not be filled as rightly pointed out the Authorised Representatives have to be seen on the day OERS was implemented. There is no express provision providing for filling up of the vacancy caused due to OERS.
As is made out by the Authorised Representatives, even though 4,468 vacancies arose due to OERS, hardly any such vacancy could be filled up during the year. That in future need based recruitment could be made by the RBI, does not, in my view, violate the guidelines prescribed in Rule 2BA(iv).
Thus guideline in Rule 2BA(iv) is broadly complied with by OERS of RBI.
7. I am in agreement with the findings of the learned CIT(A).
8. The learned Counsel has further pointed out that the Department has not filed any appeal against the above order of the learned CIT(A), Kolkata and therefore, similarly placed assessees should not be denied this exemption. This plea of learned Counsel has not been controverted by the Department. In my opinion, learned Counsel's this argument carries considerable force. The assessees which are on same footing should not be denied exemption only because they are geographically placed differently. There should be consistency in allowing the exemption to all the employees by the Department. In this regard I may refer to the decision of Hon'ble Madras High Court in the case of Seshasayee Paper & Boards Ltd. v. IAC wherein it has been held that finality of order cannot be disturbed except by process authorized by law. I may also refer to the decision of Hon'ble Supreme Court in the case of CIT v. Rao Thakur Narayan Singh wherein it was held that when the order of the Tribunal had attained finality, then the finding of Tribunal, even though by mistake, that the officer could not initiate reassessment proceedings in respect of the interest income also, was binding on the AO and he could not reopen the assessment over again to include the interest income. Thus, the legal position is very clear that even the wrong findings are binding between the parties inter se unless reversed in accordance with law.
9. When Department has not preferred any appeal against the order of the learned CIT(A), Kolkata then in principle, it has accepted the order and therefore, agreed that the scheme was substantially in conformity with the guidelines laid down under Rule 2BA. Therefore, Department cannot, take a different stand in present appeal.
10. In view of aforementioned discussion, I set aside the order of the learned CIT(A) and direct the AO to allow exemption under Section 10(10C) to the assessee.
11. In the result, the assessee's appeal is allowed.
Reference Under Section 255(4) of The IT Act, 1961 21st Nov., 2006 Since there is difference of opinion between the Members, who have heard this appeal, we, in terms of Section 255(4) of the IT Act, 1961, frame the following question and request the Hon'ble President, Tribunal, for referring the same to the Third Member for his opinion:
Whether on the facts and circumstances of the ease, assessee is entitled for exemption under Section 10(10C) of the IT Act, 1961 amounting to Rs. 5 lakhs out of sum of Rs. 13,52,784 received by him on voluntary-retirement from the services of RBI ?
G.D. Agrawal, Vice President (As Third Member): 4 th Dec., 2007 On account of difference of opinion amongst Members of Lucknow Benches, the Hon'ble President, Tribunal nominated me as a Third Member under Section 255(4) of the IT Act, 1961. The question referred for my adjudication reads as under:
Whether on the facts and circumstances of the case, assessee is entitled for exemption under Section 10(10C) of the IT Act, 1961 amounting to Rs. 5 lakhs out of sum of Rs. 13,52,784 received by him on voluntary retirement, from the services of RBI ?
2. The facts of the case are that Reserve Bank of India (hereinafter referred to as RBI) announced VRS known as Optional Employees Retirement Scheme (hereinafter referred to as OERS). During the year under consideration, the assessee opted for OERS. The assessec received a sum of Rs. 13,52,784 from RBI under the said OERS. In the return of income, assessee claimed exemption of Rs. 5 lakhs as per provisions of Section 10(10C) of the Act. The AO did not accept the said claim of the assessee on the ground that RBI itself vide its order dt. 31st Aug., 2005 confirmed that said scheme of early retirement did not fulfil guidelines laid down in Rule 2BA of the IT Rules and as such amount paid was treated as ex gratia and subjected to deduction of tax at source. The learned CIT(A) also confirmed the action of the AO. On appeal to the Tribunal, the learned JM agreed with the finding of the learned C1T(A). However, the learned AM opined that the assessee has fulfilled the conditions laid down in Rule 2I3A of the IT Rules. He also held that finding of the RBI was based upon the opinion given by M/s Choksi & Co., chartered accountants regarding liability of RBI for deduction of tax at source. He was of the opinion that the view taken by the RBI on the opinion of the chartered accountants cannot be the sole basis for denying assessee's claim under Section 10(10C) of the Act. Accordingly, the learned AM held that assessee is entitled to exemption under Section 10(10C) of the Act.
3. At the time of hearing before me, the learned Counsel for the assessee pointed out that several Benches of Tribunal have decided identical issue and have held that scheme of RBI fulfils the requirement of Section 10(10C) of the Act r/w Rule 2BA of the IT Rules. He referred to following decisions of Tribunal:
____________________________________________________________________________ S. No. ITA No. In the case of Order dt.
_________________________________________________________________________
1. 2224/Kol/2005 ITO v. Sukdeb Haider, etc. 7.3.2006
2. 6384/Mum/2006 and Vaishali A. Shelar v. Asstt. 28.3.2007 Ors. (222 appeals) CIT. etc.
3. 471/Mad/2006 and C.S. Subramanian v. Asstt. 30.4.2007 Ors. CIT, etc.
4. 233,237,239/Bang/ Padmlni Ramachandra v. ITO, 25.5.2007 2007 and Ors. etc.
5. 232/Nag/2007 and Asstt. CIT v. Smt. Meera 26.6.2007 Ors. Bagchi, etc.
6. 228/Chd/2007 B.K. Ajmani v. ITO 11.7.2007
7. 1275/Luck/2006 and Ors. Arun Rohtagi v. ITO, etc. 24.8.2007
8. 403/Luck/2007 and ITO v. Vishwajit Singh, etc. 24.8.2007 Ors.
9. 498/Luck/20O7 and Ram Chandra v. ITO, etc. 31.8.2007 Ors.
10. 558 and 560/Luck/ Ram Niwas Bajpai v. ITO, etc. 26.10.2007 2007 and Anr.
11. 559 and 564/Luck/ Babue Lal v. ITO, etc. 26.10.2007 2007 and Anr.
4. He further submitted that the scheme of the RBI was same in all the above eases. It was further contended by the learned Counsel for the assessee that the assessee has fulfilled the conditions prescribed under Rule 2BA of the IT Rules. He also stated that provision granting exemption should be liberally construed.
5. The learned Departmental Representative, on the other hand, relied upon the orders of the AO, learned CIT(A) as well as the learned JM. He stated that assessee has to fulfil the conditions prescribed under Rule 213A of the IT Rules, then only he will be entitled to exemption under Section 10(10C) of the Act. He, therefore, submitted that the order of the learned CIT(A) should be sustained. The learned Departmental Representative was fair enough to admit that he was unable to lay his hands on any decision of the Tribunal wherein exemption under Section 10(10C) of the Act was denied to the employees of RBI who took voluntary retirement under the above scheme.
6. I have carefully considered the arguments of both the sides and perused the material placed before me. I find that the Tribunal, Murnbai Benches has considered similar issue in group cases of 222 assessees who also took voluntary retirement from RBI under the same scheme in ITA No. 6384/Mum/2006, etc. (supra). The Tribunal considered the facts and the arguments of both the sides at length and concluded as under:
Sums paid on voluntary retirement to the extent of rupees five lakhs are exempted from being charged to tax by reason of Section 10(10C). Even if the payment is stretched over a period of years, the same could not become chargeable to tax in any subsequent assessment year.
What is not otherwise taxable cannot become taxable because of admission of the assessee. Nor can there be any waiver of the right otherwise admissible to the assessee in law. The chargeability is not dependent on the admission of or waiver by the assessee. Chargeability is dependent on the charging section, which needs to be strictly construed.
It may not be out of place to mention that the Calcutta High Court while dealing with the Writ Petition in 4957/W/2004 in its operative para has expressed the following view:
Prima facie, it appears that money received on account of voluntary retirement upto the sum of Rs. 5 lakhs was not taxable. The RBI, it appears was conscious of the legal position and that is why it went in for advice in the matter. The correctness of the advice rendered to them however appears to be doubtful. This Court, however, does not pass any opinion with regard thereto.
This will answer whether the opinion expressed by the chartered accountant on the issue will make the sums in question taxable. Neither the opinion of the chartered accountants nor the views of the RBI will finally determine the fate of exemption that is claimed under Section 10(10C) but the satisfaction of the conditions or guidelines laid down by the IT Rides, 1962. A plain reading of section and guidelines of Rule 2BA shows that the scheme in question leaves no doubt in our minds that the sums in question are already exempt under Section 10(10C) of the Act upto the extent of Rs. 5 lakhs.
7. Similar view is taken by Tribunal Kolkata, Chennai, Bangalore, Nagpur, Chennai and Luck now Benches in the cases referred to above. No contrary decision is brought on record by the learned Departmental Representative. When in the cases of various other employees of RBI, who took voluntary retirement under the same scheme, various Benches of Tribunal have taken a consistent view that employees have fulfilled requirement of Section 10(10C) of the Act f/w Rule 2BA of the IT Rules, I do not find any justifiable reason to take a different view. In the case under consideration before me also, the learned AM has pointed out that merely because RBI has deducted TDS On the payment made to the assessee on the basis of some opinion expressed by M/s Choksi & Co., chartered accountants, it cannot be conclusive to adjudicate whether OERS fulfils the conditions laid down under Section 10(10C) of the Act r/w Rule 2BA of the IT Rules. I have already noted earlier that several other Benches of the Tribunal (i.e., Mumbai, Kolkata. Bangalore, Nagpur and Luck now) have taken the view that the scheme fulfils the conditions laid down in Section 10(10C) r/w Rule 2BA. No contrary decision is brought to my knowledge. In view of the above, I agree with the learned AM and hold that the assessee is entitled for exemption under Section 10(10C) of the Act amounting to Rs. 5 lakhs out of sum of Rs. 13,52,784 received by him on voluntary retirement from RBI.
8. The matter will now go to the Division Bench to pass an order as per majority view.
H.L. Karwa, J.M. : 12th Dec., 2007
9. The Hon'ble Vice President, Shri G.D. Agrawal sitting as Third Member has given his opinion vide order dt. 4th Dec, 2007 in respect of following question:
(i) Whether on the facts and circumstances of the case, assessee is entitled for exemption under Section 10(10C) of the IT Act, 1961 amounting to Rs. 5 lakhs out of sum Rs. 13,52,784 received by him voluntary retirement from the services of RBI ?
(ii) The Hon'ble Vice President has concurred with the view of the learned AM in respect of above question. Thus, in accordance with the majority view, the assessee's appeal is allowed.
In the result, assessee's appeal is allowed.