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Facts
The assessee claimed an exemption under Section 10(10A) of the Income Tax Act for Rs. 34,01,898/-. The Assessing Officer disallowed this claim. The assessee's subsequent appeal to the CIT(A) was also dismissed.
Held
The Tribunal held that the assessee is entitled to the exemption under Section 10(10A) as the lumpsum payment received was in lieu of pensionary rights. The denial of this claim by the AO was an apparent error that could be rectified under Section 154.
Key Issues
Whether the lumpsum payment received by the assessee in lieu of pensionary rights is eligible for exemption under Section 10(10A), and whether the denial of this claim constitutes an apparent error rectifiable under Section 154.
Sections Cited
10(10A), 143(3), 154
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
O R D E R PER RAJ PAL YADAV, VP
The assessee is in appeal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 20.11.2024 passed for assessment year 2013-14.
The assessee has raised six grounds of appeal, however, his grievance revolves around a single issue, namely, whether A.Y.2013-14 2 assessee is entitled for deduction u/s 10(10A) of the Income Tax Act, 1961 amounting to Rs.34,01,898/-.
3. The brief facts of the case are that assessee has originally filed his return of income on 03.08.2013 declaring an income of Rs.1,38,06,938/-. This return was revised on 16.08.2014 declaring an income of Rs.1,04,05,040/-. Thus, assessee has claimed exemption u/s 10(10A) of the Income Tax Act amounting to Rs.34,01,898/-. The AO has passed the assessment order u/s 143(3) and did not allow the claim of the assessee u/s 10(10A). The assessee did not challenge this action of the AO in appeal, rather, on coming to know an order of ITAT, Chandigarh Bench in similar case of Shri Anil Suri and Shri Dharam Singh Rawat, who also retired from Ranbaxy Laboratories Ltd. They also availed similar benefit and ultimately their appeals were allowed by the Tribunal. He filed an application u/s 154 of the Income Tax Act pointing out that there is apparent error in the order of the AO whereby claim made u/s 10(10A) has been disallowed. This application has been dismissed by the AO.
Appeal to the CIT (Appeals) did not bring any relief to the assessee.
ITA No.97/CHD/2025 A.Y.2013-14 3
With the assistance of ld. Representative, we have gone through the record carefully. It emerges out from the record that assessee was an employee of M/s Ranbaxy Laboratories and worked for 25 years. According to the Company’s Policy bearing No.32A, assessee was entitled to pension as one of the retirement benefits which was applicable to all management employees who retired on completion of 10 years’ of company’s service or retired from service of the company after completing 20 years of continuous service. Thereafter, Management has formulated various other policies which, according to the ld. counsel for the assessee was Policy No. 32D, 32A, 32B and 32C. The assessee has retired and got a lumpsum payment of Rs.68,03,796/- which was in lieu of his pensionary claim. Thus, according to the assessee, he claimed exemption u/s 10(10A). The claim of the assessee to the extent of Rs.34,01,898/- was denied.
5.1 The issues which have emerged out before this Bench are of two folds : a) Whether assessee is entitled for exemption amounting to Rs.34,01,898/- u/s 10(10A) ? b) Whether there was an apparent error in the order of the AO vide which such claim was denied and it could be rectified u/s 154 of the Income Tax Act ?
ITA No.97/CHD/2025 A.Y.2013-14 4
As far as the first fold of contention is concerned, we take note of relevant part of Section 10(10A) of the Income Tax Act, which reads as under : (10A) (i)..; (ii) any payment in commutation of pension received under any scheme of any other employer, to the extent it does not exceed— (a) in a case where the employee receives any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive, and (h) in any other case, the commuted value of one-half of such pension, such commuted value being determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality; [ (iii) any payment in commutation of pension received from a fund under clause (23AAB) ;] 6.1 The ld. counsel for the assessee submitted that perusal of this definition would indicate that it contemplates only one pre- condition that commutation of pension should take place. It does not lay down that such commutation of pension would be received at the time of superannuation/retirement. This concept has been introduced by the AO without there being any legislative backing. He submitted that this aspect has been considered by the ITAT in ITA 127/CHD/2019 and ITA 870 to 872/CHD/2018 in the case of Shri Anil Suri and Shri Dharam Singh Rawat and others.
6.2 On the other hand, ld. DR was unable to controvert the proposition laid down in the orders of the Co-ordinate Bench. He only submitted that assessee ought to have challenged the A.Y.2013-14 5 assessment order before the CIT (Appeals) instead of filing application u/s 154 of the Income Tax Act.
We have duly considered the rival contentions and gone through the record carefully. A perusal of Section 10(10A) would reveal that it nowhere provides that benefit would only accrue to the assessee on superannuation/retirement. If assessee has received lumpsum payment in lieu of pensionary benefit under the Scheme formulated by the employer, then that would fall u/s 10(10A)(ii) i.e. payment in commutation of pension received under any scheme of any other employer to the extent it does not exceed. So, there was no other restriction. Thus, assessee is entitled for exemption u/s 10(10A) of the Income Tax Act.
7.1 The second question arose whether it is an apparent error which can be rectified u/s 154 of the Income Tax Act. The power of rectification u/s 154 of the Income Tax Act can be exercised only when the mistake which is sought to be rectified is an obvious and patent mistake which is apparent from the record and not a mistake which requires to be established by arguments and a long- drawn process of reasoning on points on which there may conceivably be two opinions. The ld. counsel for the assessee has A.Y.2013-14 6 placed on record large number of decisions wherein it has been propounded that if assessee is entitled for a benefit admissible in law, then on account of procedural requirement, such benefit should not be denied to the assessee. We take note of the observation of Hon'ble Madhya Pradesh High Court in the case of CIT Vs K.N.Oil Industries 142 ITR Page 13. The following observations are worth to note, which read as under:
“The learned standing counsel for the Department placed reliance upon Anchor Pressings (P.) Ltd. v. CIT [1975] 100 ITR 347 (All.), Sharda Prasad v. CIT [1975] 100 ITR 373 (All.) and Paramount Trading Corporation v. ITO [1980] 124 ITR 55 (All.), in support of his submission that as no relief under section 35B was claimed by the assessee in the return, the mistake in not granting the relief could not be apparent and could not be corrected under section 154. These cases which were decided by the Allahabad High Court do support the submission of the learned counsel. But, with great respect, we are unable to agree with the view taken in them. The record of the assessment is not confined to the return. Section 154 which confers jurisdiction for rectifying mistake enables the ITO to assume jurisdiction when he finds "any mistake apparent from the record". The word "record" as used in section 154 will include all that material which forms part of the assessment proceedings and not only the return. It is also not correct to say that if the assessee omits to claim a relief allowable to him under the provisions of the Income-tax Act. he is not entitled to get that relief. It is the duty of the ITO and other officers administering the Act to inform the assessee that he is entitled to a particular relief if it is apparent that he is so entitled from the material available in the proceedings of assessment. This duty as been highlighted by a circular issued by the CBR. For these reasons, the Gujarat High Court in Chokshi Metal Refinery v. CIT [1977] 107 ITR 63 (Guj.), dissented from the view taken by the Allahabad High Court in the aforesaid cases and held that if it is apparent from the record of assessment that the assessee was entitled to a particular relief, the ITO can rectify that mistake under section 154 although the said relief was not claimed by the assessee in the return. We respectfully agree with the view taken by the Gujarat High Court.”
7.2 Similarly, ITAT Ahmedabad Bench in the case of Kiritkumar Hiralal Doriwala Vs Wealth-tax Officer, reported in 107 TTJ 31 A.Y.2013-14 7 made reference to the CBDT Circular bearing No. 14(XL-35) of 1955. This Circular has not been withdrawn. It provides that AO would draw the attention of assessee about entitlement of any refund or relief. The AO would freely advise them when approached by them as to their rights and liabilities, as to the procedure to be adopted for claiming refund and relief. The ITAT Ahmedabad has made reference to the judgement of Madhya Pradesh in K.N. Oil Industries. The Hon'ble jurisdictional High Court has also made reference to the judgement of Hon'ble Calcutta High Court in the case of CIT Kolkata Vs South Eastern Railway Employees Co-op Credit Society Ltd. reported in 73 taxmann.com 123. The relevant observation reads as under :
"11. Mr. Saraf submitted that this is a new case made out by the assessee before the High Court. This was new the plea before any of the authorities. He is no doubt correct in his submission. But Court cannot refuse I give a person what is due to him. As a matter of fact, only that is a good judgment which renders even.7 pose his due. Whether the assessee claimed the amount or did not claim the amount, is not of much importance. What is of importance is whether the benefit is allowable in law? If an answer to that question is in d affirmative, then that benefit has be allowed.”
7.3 The Assessing Officer was of the view that this payment is not retirement benefits but a payment received on account of extinguishment of their employment on other benefits. He has also observed that assessee has joined the subsequent group and there A.Y.2013-14 8 is no termination of employee-employer relationship. It is pertinent to observe that from one Management i.e. Ranbaxy Laboratories, assessee's services came to an end. He was retired and in lieu of his pensionary rights, he got this amount. If some retired employee avails the other employment, then how it could prohibit him to claim the pension. We fail to appreciate this logic of the AO. Therefore, we are of the view that assessee is entitled for exemption u/s 10(10A). This was an apparent error in the order of the AO when this benefit was denied to the assessee and application u/s 154 ought to have been allowed by him after following the order of the ITAT passed in similarly situated employees’ cases. Accordingly, we allow the appeal of the assessee and direct the AO to grant benefit of Section 10(10A) of the Act i.e. exemption of Rs.34,01,898/-.
In the result, appeal of the assessee is allowed.
Order pronounced on 11.09.2025.