SATINDER PAUL THROUGH L/H NEELAM SAINI,PINJORE vs. INCOME TAX OFFICER, PANCHKULA

The ld. Counsel for the assessee has also placed reliance on the decision dated 20.09.2023 of the Co-ordinate Bench of this Tribunal in bunch of cases with lead case in in the case of Shri Suresh Pal Chauhan Vs ITO, Panchkula, the facts and issue involved therein being identical to the case of the assessee, wherein the Tribunal, after considering the decision of the ld. CIT(A) in the case of other employees, wherein relief has been granted by the ld. CIT(A) and after having detailed discussion on the merits of the case, has decided the issue in favour of the assessee. The relevant part of the order of the Tribunal, for the sake of ready reference is reproduced hereunder :

The provisions of Section 10(10B) read as under: “any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, at the time of his retrenchment: Provided that the amount exempt under this clause shall not exceed- (i) an amount calculated in accordance with the provisions of clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947); or (ii) such amount, not being less than fifty thousand rupees, as the Central Government may, by notification in the Official Gazette, specify in this behalf, whichever is less: Provided further that the preceding proviso shall not apply in respect of any compensation received by a workman in accordance with any scheme which the Central Government may, having regard to the need for extending special protection to the workmen in the under- taking to which such scheme applies and other relevant circum- stances, approve in this behalf. Explanation. For the purposes of this clause- (a) compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment; (b) compensation received by a workman, at the time of the transfer (whether by agreement or by operation of law) of the ownership or management of the undertaking in which he is employed from the employer in relation to that undertaking to a new employer. shall be deemed to be compensation received at the time of his retrenchment if- (i)the service of the workman has been interrupted by such transfer; or (ii) the terms and conditions of service applicable to the work- man after such transfer are in any way less favourable to the workman than those applicable to him immediately before the transfer; or (iii) the new employer is, under the terms of such transfer or otherwise, legally not liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer; (c) the expressions "employer" and "workman" shall have the same meanings as in the Industrial Disputes Act, 1947 (14 of 1947) 8. The provisions of Section 10(10C) read as under: “any amount received" or receivable by an employee of- (i) a public sector company; or (ii) any other company; or (iii) an authority established under a Central, State or Provincial Act; or (iv) a local authority; or (v) a co-operative society; or (vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (vii) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961): or (viia) any State Government; or (viib) the Central Government; or ITA 136/CHD/2025 A.Y. 2017-18 5 (viic) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazettes, specify in this behalf; or (viii) such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf. "on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (1), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees: Provided that the schemes of the said companies or authorities "[or societies or Universities or the Institutes referred to in sub-clauses (vii) and (viii)], as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be prescribed. Provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year: Provided also that where any relief has been allowed to an assessee under section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under this clause shall be allowed to him in relation to such, or any other, assessment year.”

The relevant guidelines for the purposes of Section 10(10C) are contained in Rule 2BA which read as under: “2BA. Guidelines for the purposes of section 10(10C) The amount received' by an employee of- (i) a public sector company; or (ii) any other company; or (iii) an authority established under a Central, State or Provincial Act; or (iv) a local authority; or (v) a co-operative society; or (vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (vii) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961); or (viia) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette, specify in this behalf, or (viii) such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf, at the time of his voluntary retirement or voluntary separation shall be exempt under clause (10C) of section 10 only if the scheme of voluntary retirement framed by the aforesaid company or authority or co-operative society or University or Institute, as the case may be, or if the scheme of voluntary separation framed by a public sector company, is in accordance with the following requirements, namely:- (i)it applies to an employee who has completed 10 years of service or completed 40 years of age; (ii) it applies to all employees (by whatever name called) including workers and executives of a company or of an authority or of a co-operative society, as the case may be, excepting Directors of a company or of a co-operative society: (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; (v) the retiring employee of a company shall not be employed in another company or concern belonging to the same management; (vi) the amount receivable on account of voluntary retirement or voluntary separation of the employee does not exceed the amount equivalent to three months salary for each completed year of service or salary at the time of retirement ITA 136/CHD/2025 A.Y. 2017-18 6 multiplied by the balance months of service left before the date of his retirement on superannuation: Provided that requirement of (i) above would not be applicable in case of amount received by an employee of a public sector company under the scheme of voluntary separation framed by such public sector company. Explanation. In this rule, the expression 'salary' shall have the same meaning as is assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule.”

Section 10(10C) talks about any amount received or receivable by an employee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company, a scheme of voluntary separation. It has been further provided that the schemes governing the payment of such amount are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be prescribed. It has been further provided that quantum of exemption shall not exceed five lakh rupees.

We therefore find that one of the fundamental differentiation between the two exemption provisions and the respective sphere these provisions operate in lies in the nature ITA 136/CHD/2025 A.Y. 2017-18 7 and intent of the scheme – whether the scheme is for extending special protection to the workmen in the undertaking in the context of closing down of the undertaking or whether the scheme is for employees seeking voluntarily retirement or voluntary separation and the scheme is drawn up to result in overall reduction in the existing strength of the employees and to enable economic viability of the undertaking which continues to operate and function and there is no proposal or intent to close down the undertaking.

The inter-play between the aforesaid exemption provisions keeping in view the objective of the scheme and nature of benefit which flows to the workmen/employees under the package came up for consideration before the Hon’ble Madras High Court in case of Hindustan Photo Films Workers vs Government of India (Supra) and it was held that the same has to be tested based on its plain language without adding any interpretation and the relevant findings are contained at para 28- 34 of its order which reads as under: “28. Having held so, the only other question that remains to be decided is with regard to deduction of tax at source. Section 10 of the IT Act falls in Chapter III and it deals with incomes not included in total income. Section 10 states that in computing the total income of a previous year of any person, any income falling within any of the clauses mentioned therein shall not be included. For the purpose of this case, sub-section (10B) & (10C) of Section 10 would be relevant, which are quoted herein below:- Incomes which do not form part of Total Income Incomes not included in total income.

In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included. …….. S.10(10B) any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, [at the time of his retrenchment: Provided that the amount exempt under this clause shall not exceed:- (i) an amount calculated in accordance with the provisions of clause (b) of Section 25F of the Industrial Disputes Act, 1947 (14 of 1947); or (ii) such amount, not being less than Rs. Five lakhs, as the Central Government may, by notification in the Official Gazette, specify in this behalf, Whichever is less: Provided further that the preceding proviso shall not apply in respect of any compensation received by a workman in accordance with any scheme which the Central Government may, having regard to the need for extending special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances, approve in this behalf. Explanation:- for the purposes of this clause:- (a) compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment; ITA 136/CHD/2025 A.Y. 2017-18 8 (b) compensation received by a workman, at the time of the transfer (whether by agreement or by operation of law) of the ownership or management of the undertaking in which he is employed from the employer in relation to that undertaking to a new employer, shall be deemed to be compensation received at the time of his retrenchment if:- (i) the service of the workman has been interrupted by such transfer; or (ii) the terms and conditions of service applicable to the workman after such transfer are in any way less favourable to the workman than those applicable to him immediately before the transfer; or (iii) the new employer is, under the terms of such transfer or otherwise, legally not liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer; (c) the expressions employer and workman, shall have the same meanings as in the Industrial Disputes Act, 1947 (14 of 1947); ……. S.10(10C) any amount received (or receivable) by an employee of:- (i) a public sector company; or ……….. (viii) such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf, [on his] [voluntary retirement or termination of his service, in accordance with any scheme or schemes or voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme or voluntary separation, to the extent such amount does not exceed five lakh rupees]; Provided that the schemes of the said companies or authorities [or societies or Universities or the Institutes referred to in sub-clauses (vii) and (viii), as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be prescribed [***]: provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year:].

The case of the revenue is that the package given to the workmen is a VRS package and it would fall within Section 10(10C)(viii) and accordingly, taxable if the receipt exceeds the exempted limit. The case of the petitioner is that the severance package received by them would fall within Section 10(10B) and shall not be included as income in computing total income of the employees. The contention of the revenue that TDS proceeding is independent of the other provisions of the Act cannot be disputed, but however, what the revenue seeks to a state is that it is for the Assessing Officer to examine as to whether the receipts in the hands of the employee is a compensation for a closure or a package received as a Voluntary Retirement settlement.

Admittedly, the instant case, is not a case of a single assessee, but a large section of employees of HPF Ltd., a Government of India company. If it is clear from the plain language adopted in the scheme as regards the nature of benefit which is extended to the employees, then the employees need not be driven to approach the Assessing Officers to establish that the receipts are not taxable in their hands. Therefore, the nature of the benefit which flows to the employees under the package has to be tested on its plain language without adding any interpretation.

W.P.No.18608 of 2015; the petitioner in this Writ Petition is an association of officers working in HPF and the relief sought for by them is also identical. The yardstick applicable to workmen as defined under the Industrial Disputes Act, cannot be made applicable to the officers. Therefore, under normal circumstances whatever reasoning assigned by this Court in the preceding paragraphs would apply to the employees in the workmen category. Nevertheless, the Central Government does not make any distinction in its press information, dated 28.02.2014, nor do the impugned proceedings/circular, as it has extended the special benefit to all the employees of HPF. Therefore, in the given facts and circumstances, whatever is the interpretation given by this Court while testing the prayer made in the Writ Petitions filed by the workers would equally apply to this Writ Petition filed by the officers association.

In the result, the Writ Petitions are partly allowed on the following lines:- (i) The declaratory relief sought for to declare the proceedings dated 20.03.2014, and the circular dated 21.03.2014, as illegal, is rejected and the relief sought for to pay 72 months, salary stands rejected. (ii) It is held that the receipts in the hands of the employees of the HPF, pursuant to the severance package announced by the Central Government and intimated vide proceedings/circular is held to be a special privilege/protection granted to the employees of the HPF Ltd and therefore, the provisions of the Section 10(10B) of the Income Tax Act, 1961 are attracted and accordingly, the same shall not fall within the definition of income, while computing the total income of concerned employee and income tax cannot be deducted from the severance package paid to the employees of HPF. (iii) Pursuant to interim orders dated 22.12.2015, the amounts deducted towards income tax was directed to be kept in deposit to the credit of the Writ Petition in Indian Bank, High Court Branch. In the light of the finding rendered supra holding ITA 136/CHD/2025 A.Y. 2017-18 10 that no income tax is recoverable from the severance package, the amount deducted as income tax shall be disbursed to the respective employees by the respondents. (iv) It is reiterated that in these writ petitions, the Court has considered the VRS package and the consequential circular issued by the HBF relief sought for, for payment of 72 months salary instead of 60 months salary as proposed in the VRS Scheme and not to deduct income tax on the amount payable to them as in respect of recovery which were sought to be made pursuant to the circular dated 10.07.2013 and 01.07.2013 were already been quashed by this Court in W.P.Nos.24460, 24355 and 25491 of 2013 dated 29.11.2016. (v) The respondents shall comply with the above directions within a period of one month from the date of receipt of a copy of this order as during the pendency of these writ petitions, all the employees have exercised their right to accept the severance package though without prejudice to their rights in the writ petition. Now the writ petition has been finally disposed of, it is only the implementation of the severance package which shall be done within one month from the date of receipt of a copy of this order. (vi) As agreed to by the employees of the HBF, all the employees on receipt of the severance packages in terms of the above direction shall vacate and hand over vacant possession of the quarters within a period of one month from the date on which they received the monetary benefits. No costs. Consequently, connected Miscellaneous Petitions are closed.

In the aforesaid case, it was held by the Hon’ble Madras High Court that the Government of India did not authorise the HPF to bring out a VRS package, but what was approved was a non- plan budgetary support, which is in the nature of a grant given by the Central Government to the second respondent for a specific purpose and a specific reason. The purpose is to rehabilitate the employees of HPF and the reason being that the employees have been receiving the pay scales as of 1987, the increase in the cost of living has made it very difficult for them to survive and meet their financial obligations and the Government thought fit to offer this package to enable the employees to come out of the financial crises. If such was the sanction made by the Central Government, it undoubtedly would qualify the parameters laid down under sub-section (10B) of Section 10 of the Income Tax Act. This is so because the monetary benefit which will accrue to the employees is in the nature of a compensation, which is pursuant to a decision taken by the Government of India specifically for the employees of HPF. Therefore, the amount would be exempted from income tax under Section 10(10B) of the IT Act. It was further held by the Hon’ble High court that the yardstick applicable to workmen as defined under the Industrial Disputes Act, cannot be made applicable to the officers. Therefore, under normal circumstances whatever reasoning assigned by this Court in the preceding paragraphs would apply to the employees in the workmen category. Nevertheless, the Central Government does not make any distinction in its press ITA 136/CHD/2025 A.Y. 2017-18 11 information, dated 28.02.2014, nor do the impugned proceedings/circular, as it has extended the special benefit to all the employees of HPF. Therefore, in the given facts and circumstances, whatever is the interpretation given by this Court while testing the prayer made in the Writ Petitions filed by the workers would equally apply to this Writ Petition filed by the officers association.

In the instant case, what is therefore relevant to determine is what has been approved by the Government of India and the objective and purposes thereof and the nature of the benefit which ultimately flows to the employees. In this regard, we refer to press note dated 27/10/2016 issued by the Ministry of Heavy Industries and Public Enterprises, Department of Heavy industry and the contents thereof reads as under: “Budgetary support to HMT Ltd for payment of outstanding salary/wages and other statutory dues, introduction of VRS/VSS and closure of operations of Tractor Division and transfer of land to Government entities 1. The Cabinet has today approved the proposal for budgetary support to HMT Ltd. for payment of outstanding salary / wages and other employee related dues and closure of HMT Tractor Division by offering attractive VRS / VSS at 2007 notional pay scales and transfer of selected parcels of land at Bangalore and Kochi to Government entities. 2. HMT Ltd., a Central Public Sector Enterprise under the Ministry of Heavy Industries and Public Enterprises of the Government of India was established at Bangalore in 1953 with the objective of producing machine tools required for building an industrial edifice for the country. HMT played a key role in laying the foundation for evolution of engineering and manufacturing capabilities in the country. HMT Tractor Division was established in Pinjore, Haryana in 1971 to manufacture HMT Tractors. Performance of the company started to decline in the '90s, in the post liberalisation economic environment with rising costs, stiff competition from international players and availability of imported goods at cheaper rates. Several efforts were made in past to arrest the declining trend but it could not succeed to turn around. HMTL's profit making tractor business was affected due to poor off-take, under-utilisation of capacity and working capital constraints, etc. It was observed that continuation in Tractor Business with its insignificant market share in the sector may not be a financially viable and sustainable option for HMT Ltd., and hence it would be prudent to close the tractor business, make an exit from this segment and focus on the core sector of machine tools. 3 The Tractor Division has been incurring losses continuously and is unable to pay the salaries and other statutory dues of its employees. The employees of Tractor Division based at Pinjore have not been paid salary since July, 2014 and other statutory dues are also pending since Nov. 2013. The statutory dues (Terminal benefits, PF, Gratuity, Leave encashment etc.) are also pending for the employees of other Divisions of HMTL [Corporate Head Office(CHO), Common Service Division (CSD) and Food Processing Machinery unit, Aurangabad (FPA)]. In view of the deteriorating position of the company and hardship being faced by the employees due to non-payment of salary / wages and other retirement dues, it has been decided to close down the Tractor Division of HMT Ltd by offering attractive VRS/VSS to its employees and clearing all their dues.

The Cabinet has also accorded approval for transfer of selected small parcels of HMT land at Banglore and Kochi to different Govt. entitles for their use in larger public interest.”

We also refer to office order No. 15/16 dated 4/11/2006 issued by HMT Ltd containing details of the VRS/VSS scheme for the permanent employees who are on rolls of the Tractor Division and the contents thereof read as under: “The Administrative Ministry vide letter No. 1-0501/8/2015-PE.X dated 4th November 2016 has communicated that the Union Cabinet In its meeting held on 27th October 2016 considered and approved the closure of operations at HMT Tractor Division with offer of an attractive and Improved VRS/VSS package based on 2007 notional pay scales, in relaxation of DPE guidelines disallowing pay revision in sick/loss making CPSEs, as against the current pay scales of 1997, to all the permanent employees who are on the rolls of Tractor Division as on the date of notification. Accordingly, the approved VRS/ VSS Is Introduced In supersession of earlier Schemes, as a "ONE TIME BENEFIT", for all the permanent employees on the rolls of HMT Tractor Division, with Immediate effect. The employees who apply under the Scheme and whose VRS/VSS application is accepted by the Competent Authority will be relieved in a phased manner. The Scheme is subject to the following:

We also refer to letter No. 1-0501/8/2015-PE.X dated 4/11/2006 on the subject of budgetary support to HMT Ltd for payment of outstanding salary/wages, other statutory dues, introduction of VRS/VSS and closure of operation of the Tractor Division and transfer of land to Govt. entities issued by the Under Secretary, Ministry of Heavy Industries and Public Enterprises, Department of Heavy industry, Government of India and addressed to the Chairman and Managing Director of HMT Ltd and the contents thereof read as under: “Subject:- Budgetary support to HMT Ltd for payment of outstanding salary/wages and other statutory dues, Introduction of VRS/VSS and closure of operations of Tractor Division and transfer of land to Government entities Sir, I am directed to say that Cabinet in its meeting held on 27.10.2016 considered a Note dated 23.09.2016 and Supplementary Note dated 01.10.2016 and on the above subject and approved the following- (i) Closure of operations at HMT Tractor Division with offer of attractive and improved VRS/VSS package to allow ex-gratia and terminal benefits based on 2007 notional pay scales, In relaxation of DPE guidelines disallowing pay revision in sick/loss making CPSES, as against the current pay scales of 1997, to all the employees of Tractor Division. Employees not opting for VRS would be retrenched under the Industrial Disputes Act, 1947 as the Tractor Division is proposed to be closed down. (ii) Infusion of funds of Rs 716.72 Cr as interest free loan for the said VRS/VSS with ex- gratia and terminal benefits based on 2007 notional pay scales for all employees of the Tractor Division (Rs 335,00 Cr), clearing of employee related liabilities (Rs.271.05Cr) of HMTL and settlement of other liabilities (Rs 112.67 Cr) In respect of HMT Tractor Division. (i) Restructuring of Balance Sheet of HMTL by reduction of paid-up capital to the extent of accumulated losses of Tractor Division amounting to Rs. 848.49 Crore against Govt. of India paid up equity shareholding in the company of Rs. 1204.09 Crore and write-off of Govt. loans provided to HMT Ltd. (Re 72.02 Cr) along with accrued Interest (Rs 18.56 Cr) to be frozen as on 31/03/2016, with no further liability of Interest. (iv) Sale of land not currently in use at Pinjore unit to the Govt. of Haryana on mutually agreed terms and compensation as mentioned in Para 2.9 which may be seen as under- "HMT Ltd. Board is also in favour of monetizing the currently unutilized land at Pinjore by transferring the same to the Government of Haryana (GoH) against sultable ITA 136/CHD/2025 A.Y. 2017-18 14 compensation. It is relevant to state that there exists a dispute on the matter of ownership of the land at Pinjore between HMT Ltd and the GoH. The Issue is presently before the High Court of Haryana and Punjab, GoH is agreeable, In principle, to compensate HMT Ltd. for the sald land. The Company has identified 448 Acres of at present unutilized land in Pinjore which can be transferred. Govt. of Haryana has however, indicated that out of the above, only 306 acres can be utilized by them and the rest are covered by thick plantations, water bodies/Nullah etc. GoH/HSIDC is prepared to pay 50% of the land cost (on 50:50 sharing basis) at the circle rates ranging between Rs. 23 Lakh to Rs. 1.25 crore per acre which will be assessed after finalisation of the land pockets. However, the compensation offered by GaH is inadequate, and there is a lack of clarity on the compensation against remaining land pockets of 140 acres (446306 acres). This issue is proposed to be negotiated in detail with GoH. The process of transferring of land to GoH on mutually agreed terms and negotiation of suitable compensation will be undertaken in a time bound manner after the due approval of Cabinet." In addition, sale of other assets, which will become surplus after closure of the Tractor Division. The Company would explore the possibilities of using the productive resources, for example, factory premises of HMT Tractor Division with clearly demarcated land and buildings, plants and machineries, for leasing out on 'As Is Where is' basis to interested private parties engaged preferably In Capital Goods or Auto sector, on medium or long term basis after duly safeguarding the Gol Interest Failing this, an alternative option for strategic sale of the HMT Tractor Factory, Pinjore to national or International parties may be explored in consultation with DIPAM. In case, the productive resources/ assets of HMT Tractor Limited at Pinjore fall to elicit response of MSME Industries under medium and long term lease, falling which alternative option of strategic sale of the HMT Pinjore factory, Pinjore to national and International parties will be explored, In case, even this does not fructify then the company shall follow DPE guidelines dated 7th September, 2016. (v) Transfer/sals of Identified land parcels of HMT to various Govt. entitles as under, a) Ex post facto approval for formal transfer of 0.74 acre land in Bangalore to M/s Raman Research Institute, an autonomous Institution under the Department of Science and Technology, Govt. of India. b) Approval for accepting Transferable Development Rights (TDR) from the civic agency Bruhat Bangalore Mahanagara Palika(BBMP) in lieu of 80,000 sft.. land taken over for road widening In Bangalore. c) Prior approval for the transfer/sale of 3 acres of land, sought by National Investigation Agency (NIA) and 1.047 acre by Kerala Industrial Infrastructure Development Corporation (KINFRA) in Kochi, Kerala at circle rate or market rate determined by CPWD, whichever is higher. d) Prior approval for the transfer/sale of about 5.8 acres of land at Bangalore, to Income Tax Department and Central Excise Deptt. at circle rate or market rate determined by CPWD, whichever is higher.

In view of the above, you are requested to take appropriate action as approved by Cabinet and complete the process as per the timelines enclosed herewith.” In case of Shri Prem Pal (supra) who was one of the employees 18. of HMT Ltd., Tractor Division and who opted for the VRS scheme and had received the VRS compensation, the matter came up for consideration before the Ld. CIT(A), Panchkula who vide his order dt. 30/01/2020 has held that the assessee was eligible for exemption under section 10(10B) of the Act as the compensation received by the assessee at the time of VRS qualifies the parameters as laid down under section 10(10B) of the Act. The Ld. CIT(A) has discussed at length the intent and the objectives behind the HMT VRS scheme as well as compared the fact pattern with the case of Hindustan Photo Film Workers Vs. The Government of India (Supra) wherein the matter came up for consideration before the Hon’ble Madras High Court and the ITA 136/CHD/2025 A.Y. 2017-18 15 relevant findings of the ld CIT(A) are contained at para 5.2 to 5.2.3 of his order which read as under:

In this connection, the provisions of Section 10(10B) of the Income Tax Act are reproduced, as below. "Any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, ……….. Explanation - For the purposes of this clause- 1. Compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment; (emphasis supplied) 8.1 From the above provisions, it is clear that the income received on opting for Voluntary Retirement Scheme is an exempted income and does not form part of total income. Therefore, in view of the above discussion and after having gone through the case law relied upon by the appellant, the amount received by the appellant on opting for Voluntary Retirement is exempt u/s. 10(10B) and hence, the ground of appeal

As mentioned above, the Government of India had recommended a scheme to give relief to the employees of HPF. This proposal was approved by the Cabinet Committee on Economic Affairs and such approval was a non-plan budgetary support. The Government of India did not authorise the HPF to bring out a VRS package, but what was approved was a non- plan budgetary support, which is in the nature of a grant given by the Central Government to the second respondent for a specific purpose and a specific reason. The purpose is to rehabilitate the employees of HPF and the reason being that the employees have been receiving the pay scales as of 1987, the increase in the cost of living has made it very difficult for them to survive and meet their financial obligations and the Government thought fit to offer this package to enable the employees to come out of the financial crises. If such was the sanction made by the Central Government, it undoubtedly would qualify the parameters laid down under sub-section (108) of Section 10 of the Income Tax Act. This is so because the monetary benefit which will accrue to the employees is in the nature of a compensation, which is pursuant to a decision taken by the Government of India specifically for the employees of HPF. Therefore, the amount would be exempted from income tax in terms of the first proviso under Section 10(108) of the IT Act. In terms of clause (2) of first proviso, the ceiling limit is Rs.5,00,000/-. The second proviso states that the first proviso shall not apply in respect of any compensation received by a workmen in accordance with any scheme, which the Government may, having regard to the need for extending the special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances, approve in its behalf. The compensation which is received by the workmen would fall within the definition of compensation found in explanation to Section 10(10B).

In such circumstances, this Court has no hesitation to hold that the package having been received by the workmen as compensation pursuant to the decision taken by the Central Government to offer special protection to the employees of HPF, the same stands exempted from deduction to income tax." 4.9 In view of the above, the appellant's plea that the compensation received subsequent to the closure of the employer company, based on the decision of the Cabinet Committee on Economic Affairs, Government of India, is eligible for exemption under section 10(10 B) of the Act, is accepted. The addition made by the Assessing Officer of Rs. 23,13,096/- is deleted. Appeal on this ground is allowed.”

We are therefore intrigued by the fact that where the ld CIT(A) in other cases under identical fact pattern are consistently holding that the employees who have received similar compensation from HMT are eligible for exemption u/s 10(10B) of the Act and these cases are brought to the notice of the ld CIT(A) in the instant case, the ld CIT(A) has failed to take cognizance of these decisions. It is not even a case where the aforesaid decisions so rendered in other cases have been challenged by the Revenue or any distinguishing facts and circumstances are available on ITA 136/CHD/2025 A.Y. 2017-18 22 record and/or pointed out by the ld CIT(A). Therefore, under the identical set of facts and circumstances of the case, where the matters have been decided and the Revenue is not in appeal, following the principle of consistency as well, the matter deserve to be decided in favour of the assessee at the first appellate level itself which unfortunately has not happened in the instant case.

In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the assessee is held eligible for exemption u/s 10(10B) on whole of the amount received of voluntary retirement compensation amounting to Rs 36,07,576/- and the AO is directed to allow necessary relief to the assessee. In the result, the ground no. 3 of the assessee’s appeal is allowed.

In ground no. 2, the limited submission of the ld AR was that the assessee be allowed relief u/s 89 in respect of net gratuity (after excluding exemption claimed u/s 10(10)) of the Act. On perusal of section 89, it talks about an assessee who is in receipt of a sum of money in the nature of salary and as per section 17(1)(iii), salary includes gratuity. In view of the same, the AO is directed to provide appropriate relief as per section 89 in respect of net gratuity amount which is being brought to tax. The ground of appeal