VIJAY MEHTA,GURURAM vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(1), GURGAON
Income Tax Appellate Tribunal, DELHI BENCH ‘E’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI S.RIFAUR RAHMANVijay Mehta, vs.
PER S.RIFAUR RAHMAN,AM:
This appeal has been filed by the assessee against the order of ld. Addl./ JCIT (A), Patna dated 26.10.2023 for the Assessment Year 2017-18. 2. We observed that the case was filed by the assessee on 14.12.2023 and assessee himself appeared on two occasions and subsequently none appeared on behalf of the assessee nor any power of attorney filed. Accordingly, we proceeded to hear the case with the assistance of ld. DR of the Revenue.
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3. Brief facts of the case are, assessee is a salaried employee working in the private sector and during the AY 2017-18, he was employee of Adani
Enterprises Limited for the period of 13 days and with JMC Project
Limited for the period of 353 days. During the assessment year, his employment with Adani Enterprises Ltd. involuntarily terminated since his position became redundant due to changes in the company structure and the merger of Adani Mining Ltd. with Adani Enterprises Ltd.. As a consequence, he accepted the offer for termination of employment/severance pay. Accordingly, he received compensation of termination of employment/severance pay. The compensation money/severance pay received from Adani Enterprises Ltd. was not declared by the assessee as part of the salary and he treated the same a capital receipt. Accordingly, he declared the income in his return of income as leave encashment of Rs.2,49,600/-, ex-gratia LTC of Rs.30,604/-, ex-gratuity of Rs.1,61,609/-, ex-gratia bogus of Rs.1,93,822/-, ex-gratia variable pay of Rs.12 lakhs and notice pay of Rs.14,04,000/- which was received by him on termination of employment/severance cash pay. The return of the assessee was processed u/s 143(1) of the Income-tax Act, 1961 (for short ‘the Act’) and the amount received by the assessee as termination compensation was 3
also added to the salary income of the assessee and income was determined accordingly.
4. Aggrieved with the above order, assessee preferred an appeal before the Addl./JCIT (A), Patna. After considering the detailed submissions of the assessee, JCIT(A) sustained the addition made by the AO by relying on the decision of Hon’ble Supreme Court in the case of Checkmate
Services Pvt. Ltd. vs.CIT-1 in Civil Appeal No.2833 of 2016 by extracting the findings in the above decision in his order and he observed that as per the above decision, it is clear that any kind of exemption can only be claimed when it is expressly provided in the provisions.
However, in assessee’s case, there is no such provision available for claiming exemption.
5. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :-
“1. Deputy Commissioner of Income Tax, CPC, has erred in not allowing exemption of Leave Encashment of Rs.2,49,600, Ex Gratia LTA of Rs.30,604,
Ex-Gratuity of Rs.161,609, Ex-Gratia Bonus of Rs. 193,822, Ex-Gratia
Variable Pay of Rs.12,00,000 and Notice pay of Rs.14,04,000 which has been received on termination of employment/severance package which is allowable in view of the fact that the compensation money/severance fee received from M/s Adani Enterprises is not a salary income and it is a compensation for termination of employment/severance fee which is in nature of capital receipt and is exempt from the income tax in view of several rulings which treated such amount as capital receipt. Hence, the addition to the salary income by DCIT, CPC of Rs.24,11,564 to be deleted.
Without prejudice to the above, that on the facts of the case and in law, credit of the TDS deducted should be allowed of Rs, 21,42,893 which has been deducted by the Employer on the salary income and ICICI Bank Ltd. on the interest income. The mis-match indicated in the order of Rs.9,20,176 to be corrected and the TDS deducted of Rs.21,42,893 to be considered.
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3. Appellant prays that the addition of Rs.343,082 towards interest u/s 234 Band u/s 234 C is to be deleted TDS bas been deducted by M/s Adani
Enterprises Ltd and M/s JMC Projects Ltd and as per section 192(2C), the responsibility of providing correct and complete particulars of perquisites or profits in lieu of salary given to an employee is placed on the person responsible for paying such income i.e. the person responsible for deducting tax at source.”
Considered the submissions of the ld. DR of the Revenue and material available on record. With regard to ground no.1, it is accepted fact that the services of the assessee was terminated during the year with the agreed compensation to lay off his services. Both the lower authorities acknowledged the above and sustained the addition with the observation that there is no specific provision in the Act through which assessee can claim the above exemption. After careful consideration, we observed that there is fine differene in treating any income as revenue or capital. We observed from the record that there is Hon’ble High Court of Delhi decisions in the cases of CIT vs. Sharda Sinha & Khanna and Annadhanam vs. CIT wherein it was held that if the receipt represents compensation for the loss of a source of income, it would be capital and it matters little that the tax payer continues to be in receipt of income from other similar operation. We observed that various courts have held that termination benefits are always capital in nature at the same time, terminal benefits are revenue in nature. In the given case, assessee has terminated his services, therefore, there is clear facts on record that the 5 services of the assessee were terminated prematurely, which shows that there is loss of source of income to the assessee. Therefore, we are inclined to allow ground no.1 raised by the assessee by treating the receipts as capital in nature. 7. With regard to ground no.2, assessee has submitted that there is a mis- match of TDS credit allowed to the assessee, therefore, we are inclined to remit this issue to the file of AO with a direction to verify the claim of the assessee with the respective Form 16 and Form 26AS and accordingly allow the same as per law. Accordingly, ground no.2 raised by the assessee is allowed for statistical purposes. 8. Ground No.3 is consequential in nature and assessee has raised certain issues relating to TDS issue, the same also remitted back to the AO to verify the claim of the assessee and allow the same as per law. 9. In the result, the appeal filed by the assessee is partly allowed as per the above terms. Order pronounced in the open court on this 30th day of January, 2025 after the conclusion of hearing. (SATBEER SINGH GODARA) ACCOUNTANT MEMBER
Dated: 30.01.2025
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ITA No.3606/DEL/2023