ALBERT GNANA SELVAM DANIEL,CHENNAI vs. INCOME TAX OFFICER NON CORP WARD 1(2), CHENNAI

Aggrieved by the additions made by the AO, the assessee carried the matter in appeal before the Ld.CIT(A). The Ld.CIT(A), vide the impugned appellate order, deleted the addition of Rs.37,08,477/- made by the AO towards ex-gratia payment. However, the assessee’s claim of exemption of Rs.5,00,000/- u/s.10(10B) of the Act was dismissed by the Ld.CIT(A) as not pressed.

Aggrieved by the order passed by the Ld.CIT(A), the assessee is in further appeal before the Tribunal.

The Ld.AR for the assessee submitted that, apart from the ex-gratia amount of Rs.37,08,477/-, the assessee had also received an additional sum of Rs.12,00,000/- towards early bird incentive and group participation incentives from his employer as :-3-: ITA. No:2393/Chny/2025 part of the overall settlement under the financial scheme framed by the employer. The Ld.AR, placing reliance on various judicial precedents, contended that the said amount of Rs.12,00,000/- is also not exigible to tax in the hands of the assessee. Accordingly, it was prayed that suitable directions be issued to the Assessing Officer to delete the same.

Per contra, the Ld.DR appearing for the Revenue strongly opposed the submissions advanced on behalf of the assessee. The Ld.DR relied upon the orders of the lower authorities and prayed that the appeal filed by the assessee be dismissed.

We have heard the rival submissions and carefully perused the material placed on record. It is an admitted position that the assessee was employed with Pfizer Health Care India Private Limited and, upon closure of the factory, received ex- gratia/compensation payments from the said employer.

At the outset, we note that before this Tribunal, the assessee has raised an additional claim for the first time, contending that a sum of Rs.12,00,000/- was received towards “early bird incentive” and “group participation incentive”, which, according to the assessee, formed an integral part of the overall settlement arrived at pursuant to the financial scheme formulated by the employer. The assessee’s contention is that the aforesaid amount partakes the character of the compensation package and, therefore, deserves the same tax treatment as other ex-gratia receipts and is consequently not chargeable to tax.

We find that the Co-ordinate Pune Bench of the Tribunal, in the case of Shri Parvez Mukthar Khan v. ITO in has considered an identical issue arising from compensation received from Pfizer upon factory closure, including early bird incentive and group participation incentive. The Co-ordinate Bench, after considering the nature of such receipts under the scheme, held that the entire compensation, including the aforesaid incentive components, was not taxable in the hands of the employee.

In case, upon such verification, it is found that the said sum of Rs.12,00,000/- was indeed received by the assessee, and the said receipt represents early bird incentive and/or group participation incentive forming part of the overall settlement/compensation package under the employer’s scheme, then the JAO shall grant the corresponding relief by treating the said receipt as not taxable/exempt, in line with the ratio laid down in Shri Parvez Mukthar Khan v. ITO (supra), and accordingly delete the said amount from the total income of the assessee. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal of the assessee stands allowed for statistical purposes.