COMMISSIONER OF INCOME TAX-VII vs. KANTILAL K SOLANKI

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TAXAP/828/2008HC GujaratGJHC24025249200817 April 2015Bench: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE S.H.VORA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the substantial questions of law raised in the appeals were against the revenue and in favour of the assessees. The Court noted that the Tribunal had followed the decisions of the Bombay High Court in CIT vs. Nagesh Devidas Kulkarni and the Supreme Court in Karamchari Union vs. Union of India. Subsequently, the Bombay High Court in CIT vs. Koodathil Kallyatan Ambujakshan, approved by the Supreme Court in Chandra Ranganathan and Ors. vs. CIT, held that an assessee is entitled to exemption under Section 10(10C) up to Rs. 5 lakhs for voluntary retirement compensation, and for amounts exceeding Rs. 5 lakhs, the assessee would be entitled to benefits under Section 89. The Court also referred to a CBDT circular dated 08/05/2009, which was in line with the Bombay High Court's decision, and a Madras High Court decision in V. Natesan vs. ACIT, which upheld the entitlement to exemption under Section 10(10C) up to Rs. 5 lakhs and relief under Section 89 for amounts beyond Rs. 5 lakhs. Based on these subsequent decisions and the CBDT circular, the substantial questions of law were decided against the revenue.

What were the facts?

The appeals were filed by the Commissioner of Income Tax-VII against the assessee, Natwarlal K. Sharma, and others. The assessment years are not explicitly stated but are implied to be those where assessees claimed exemption under Section 10(10C) of the Income Tax Act, 1961, for amounts received upon voluntary retirement. The assessees also claimed benefits under Section 89 of the Act. The Income Tax Appellate Tribunal had allowed the exemption under Section 10(10C) up to Rs. 5 lakhs and the benefit under Section 89 for amounts exceeding Rs. 5 lakhs, reversing the orders of the lower authorities. The revenue is challenging the Tribunal's decision.

What were the issues?

1. Whether the Appellate Tribunal erred in law in allowing exemption under Section 10(10C) of the Income Tax Act, 1961, despite the condition in Rule 2BA of the Income Tax Rules, 1962, regarding not filling the vacancy caused by retirement, not being satisfied? (Question of law) 2. Whether the Appellate Tribunal erred in law in not considering an RBI letter dated 05/03/2005, which indicated the bank's option to make fresh recruitments against vacancies arising from retirement due to OERS, implying Section 10(10C) would not be applicable? (Question of law) Assessee's contentions: The assessee relied on the decisions of the Bombay High Court in CIT vs. Nagesh Devidas Kulkarni and CIT vs. Koodathil Kallyatan Ambujakshan, and the Supreme Court in Karamchari Union vs. Union of India and Chandra Ranganathan and Ors. vs. Commissioner of Income Tax. They argued entitlement to exemption under Section 10(10C) up to Rs. 5 lakhs and relief under Section 89 for amounts exceeding Rs. 5 lakhs. Revenue's contentions: The revenue argued that the condition in Rule 2BA regarding not filling the vacancy was not met and pointed to an RBI letter suggesting the possibility of fresh recruitment, which they contended would disentitle the assessee to the Section 10(10C) exemption.

Which sections of the Income-tax Act were involved?

Section 10(10C),Section 89

AI-generated summary — verify with the full judgment below

O/TAXAP/825/2008 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 825 of 2008 TO TAX APPEAL NO. 852 of 2008 With TAX APPEAL NO. 951 of 2008 TO TAX APPEAL NO. 956 of 2008

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA

====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ====================================== COMMISSIONER OF INCOME TAX-VII....Appellant(s) Versus NATVARLAL K SHARMA....Opponent(s) ====================================== Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 MR MAHESH B BARIYA, ADVOCATE for the Opponent(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA

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O/TAXAP/825/2008 JUDGMENT Date : 17/04/2015

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] As common question of law and facts arise in these group of Tax Appeals, all these Tax Appeals are decided and disposed of by this common judgment and order. [2.0] In all these Tax Appeals the following common substantial question of law arises; “A. Whether the Appellate Tribunal has erred in law in allowing exemption under Section 10(10C) of the I.T. Act 1961 even though conditions laid down in Rule 2BA of the I.T. Rules 1962 that the vacancy caused by such retirement was not to be filled up was not satisfied? B. Whether the Appellate Tribunal erred in law in not taking cognizance of RBI letter dated 05/03/2005 vide No.REF.Est(AH) No.3110/OERS/04- 05 which clearly stated that the bank, has kept its option open to make fresh recruitments against vacancies arising out of retirement due to OERS and Section 10(10C) of the I.T. Act 1961 would not be applicable? [3.0] It is not in dispute that in all these cases respective assessee, who opted for voluntary retirement, claimed exemption under Section 10(10C) of the Income Tax Act (hereinafter referred to as “the Act”) up to Rs.5 lacs and Page 2 of 4

O/TAXAP/825/2008 JUDGMENT further benefit under Section 89 of the Act. By the impugned judgment and order and after following the decision of the Bombay High Court in the case of CIT Vs. Nagesh Devidas Kulkarni reported in 291 ITR 407 and the decision of the Hon’ble Supreme Court in the case of Karamchari Union Vs. Union of India reported in [2001] 243 ITR 143 (SC), the learned Tribunal has reversed the orders passed by the authorities below and allowed the exemption claimed by the respective assessee under Section 10(10C) of the Act up to Rs.5 lacs and under Section 89 of the Act for above Rs.5 lacs. Subsequently, the Bombay High Court in the case of Commissioner of Income Tax Vs. Koodathil Kallyatan Ambujakshan reported in [2009] 309 ITR 113 (Bom) had an occasion to consider the exemptions claimed by the assessee who received the amount of voluntary retirement claimed under Section 89 of the Act as well as under Section 10(10C) of the Act and it is held that the assessee is entitled to exemption under Section 10(10C) of the Act with respect to the amount up to Rs.5 lacs and for the amount in excess of Rs.5 lacs the assessee would be entitled to benefits under Section 89 of the Act. The aforesaid decision has been approved by the Hon’ble Supreme Court in the subsequent decision in the case of Chandra Ranganathan and Ors. Vs. Commissioner of Income Tax reported in [2010] 326 ITR 49 (SC). Not only that even subsequently considering the decision of the Bombay High Court in the case of Koodathil Kallyatan Ambujakshan (Supra) it was held that Central Board of Direct Taxes has issued a circular dated 08/05/2009 in line with the decision of the Bombay High Court in the case of Koodathil Kallyatan Ambujakshan (Supra). It is brought to our notice that subsequently the Madras High Court Page 3 of 4

O/TAXAP/825/2008 JUDGMENT in the case of V. Natesan Vs. Assistant Commissioner of Income Tax reported in [2012] 347 ITR 645 (Mad) had an occasion to consider the circular issued by the Central Board of Direct Taxes 08/05/2009 and it is held that an employee opting for voluntary retirement and the amount received on voluntary retirement shall be entitled to exemption under Section 10(20C) of the Act, however, up to the limit of Rs.5 lacs and for the amount beyond Rs.5 lacs shall be entitled to the relief under Section 89 of the Act. [4.0] In view of the above decisions and even the subsequent circular issued by the Central Board of Direct Taxes the substantial question of law raised in the present Tax Appeals are held against the revenue and in favour of the assessee and subsequently, all the Tax Appeals deserve to be dismissed and are accordingly dismissed. No order as to costs. (M.R. SHAH, J.) (S.H. VORA, J.) Siji Page 4 of 4

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