SH. SARABJIT SINGH,MOHALI vs. ITO, W-6(2), MOHALI

आदेश/ORDER Per Sanjay Garg, Judicial Member :

The present appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)- 2, Chandigarh (in short CIT(A) dated 28.3.2018.

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“1. That on the facts, circumstances of the case and in law, the Worthy CIT(A) through his order dated 28.03.2018 has erred in passing that order in contravention of the provisions of S. 250(6) of the Income Tax Act, 1961, 2. That on facts, circumstances of the case and in law, the Worthy CIT(A) has erred in confirming the action of Ld. AO in holding the receipt of Rs.56,38,227/- from the previous employer as taxable even when the same was capital receipt and not taxable. 3. That on facts, circumstances of the case and in law, the Worthy CIT(A) has erred in confirming the action of Ld. AO whereby he denied the benefit of exemption of Rs. 56,38,227/- claimed by the appellant u/s 10(10A) as commutation of pension under the retiral policy of the company. 4. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.” 3. The facts relevant to the issue are that during the

assessment proceedings the A.O. noted that the assessee had

claimed exemption u/s 10(10A) of the Income Tax Act, 1961 (in

short ‘the Act’) amounting to Rs.56,38,227/- received as lump

sum payment from its erstwhile employer i.e.. M/s Ranbaxy

Laboratories Ltd on account of discontinuance of certain

retirement policy of company. The amount was claimed by the

assessee to be amount received on account of retirement

benefits from his employer company M/s Ranbaxy Laborites

Ltd., as per company's refreshment policy and was thus in the

nature of commuted pension and, therefore, eligible for

exemption u/s 10(10A) of the Act. In para 6.1, the Assessing

officer observed that section 10(10A) relates to members of the

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civil services, defence or to the members of all India service or

to the members of the civil services of a State or holder of civil

posts under a state or to the employees of a local authority or a

corporation established by a Central, State or provincial Act

and not the employees of the private companies. However, the

Assessing officer also further examined the claim of exemption

and finally disallowed the same for different reasons.

officer that the benefit of section 10(10A) of the Act was not

available to the assessee, the Ld. C1T(A) held that as per the

provisions of section 10(10A)(ii) of the Act, the exemption was

also available to the private employees also. However, the Ld.

CIT(A) confirmed the disallowance made by the Assessing

officer observing that the aforesaid payment was made by the

employer of the assessee employees as one time lump sum

payment on account of closure of pension policy. That while

calculating the amount payable to employees on retrenchment,

various factors were considered including the salary, length of

service completed, number of years remaining till retirement

etc. of the employees. He held that the amount had not been

paid under the scheme of commutation of pension rather the

same was paid on account of retrial policy being unilaterally

withdrawn by the employer and that the amount is not a

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commutation of pension. He also observed that even in the

retirement policy, there was no provision regarding any

commutation of pension. He, therefore, held that the assessee

was not eligible for exemption as enumerated in section 10(10A)

of the Act and denied the exemption claimed by the assessee on

this account.

gone through the record. The issue is squarely covered by the

decision of the Co-ordinate Chandigarh Bench of the Tribunal

in the case of other employees in similar facts and

circumstances vide order dated 11.3.2019 passed in ITA

No.870/Chd/2018 & Others titled as ‘Sh.Rajeshwar Sharma &

Others Vs. ITO’. This Tribunal observed as under:

“Though in strict terms, it may not be said that the amount received by the assessee was on account of commutation of pension, however, the fact on the file is that the aforesaid amount was given by the new employer who has taken over the company from the earlier employer and he had terminated the services of the employees on account of job retrenchment. The amount was paid as a compensation for retrenchment of services taking into consideration the length of service, basic salary, the age and other factors. In our view, the said amount is a compensation paid by the employer while terminating the services of the employee on account of loss of job and further subsistence, thus, the said amount was just a capital receipt in the hands of the assessee. In fact, no part of amount received by the assessee is taxable. We, therefore, allow the appeal of the assessee and delete the disallowance and consequent additions made by the Assessing officer in this respect. We further hold that the assessee is entitled to claim refund / adjustment of the tax paid in respect of the aforesaid compensation received, if so, claimed by the assessee.”

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Following the above decision of the Tribunal in the identical facts and circumstances, this appeal of the appellant stands allowed with identical directions.

Order pronounced in the Open Court on 06.05.2019.

Sd/- Sd/- डा. बी.आर.आर. संजय गग� (Dr.B.R.R.Kumar) (SANJAY GARG ) लेखा सद�य/Accountant Member �याय�क सद�य/ Judicial Member

�दनांक /Dated: ……… April, 2019 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar