NIRMALA RANI L/H OF SH. AZAD SINGH,PINJORE vs. ITO, WARD -1, , PANCHKULA

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “SMC”, CHANDIGARH HEARING THROUGH: VIRTUAL MODE BEFORE: SHRI. VIKRAM SINGH YADAV, ACCOUNTANT MEMBER Assessment Year : 2017-18 Nirmla Rani Legal Heir of Shri Azad Vs. The ITO Singh Ward-1, C/o Dhiman Bansal & Associates, 68, Panchkula Shiv Shakti Colony, Pinjore-134102 �ायी लेखा सं./PAN NO: AJBPS8427P अपीलाथ�/Appellant ��थ�/Respondent Assessee by : Smt. Neelam Dhiman, CA Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr. DR Date of Hearing : 09/10/2024 Date of Pronouncement : 26/11/2024 Order PER VIKRAM SINGH YADAV, A.M. :

This is an appeal filed by the Assessee against the order of the Ld. CIT(A) Addl./JCIT(A)-3, Hyderabad dt. 27/03/2024 pertaining to Assessment Year 2017- 18.

2. In the present appeal, Assessee has raised the following grounds of appeal:

1 That on the facts and circumstances of the case the order passed by the learned ADDL/JCIT (A)-3 Hyderabad is bad both in the eyes of law and on facts. 2 The learned ADDL/JCIT (A) erred has erred in having not considering the additional claim for exemption u/s 10(10B) of compensation amounting to Rs. 21,33,510/- (Rs. 26,33,510 - Rs. 5,00,000) received on forced retrenchment under VRS on closure of HMT Ltd (Tractor Division), instead of exemption u/s 10(10C) of the Income Tax Act wherever there is no bar on appellate authorities to consider the claim of assessee.

3 The learned ADDL/JCIT (A) erred in having not considering the additional claim for exemption u/s 10(10B) of additional gratuity compensation at 2007 scales amounting to Rs. 3,12,490/-(Rs 9,36,646 - Rs. 6,08,695) received on forced retrenchment under VRS on closure of HMT Ltd (Tractor Division) being part of compensation announced in Central Govt. Cabinet Press Release, instead of exemption u/s 10(10) of the Income Tax Act. 4 That the appellant craves leave to add or amend the Grounds of appeal before the appeal is finally heard and disposed of.

4. Ground No. 1 is general in nature, therefore, does not require any specific adjudication.

5. In Ground No. 2, the assessee has challenged the denial of claim of exemption under section 10(10B) of the Act in respect of compensation received on forced retrenchment under VRS on closure of HMT Ltd. (Tractor Division).

5.1 In this regard, during the course of hearing, the Ld. AR submitted that the matter is squarely covered by the decision of Coordinate Bench, Chandigarh in case of Shri Suresh Pal Chauhan Vs. ITO and others in and others dt. 20/09/2023 and the relevant findings are contained at para 6 to 24 of its order which read as under:

“6. We have heard the rival contentions and perused the material available on the record. The issue under consideration relates to whether the assessee is eligible for exemption under section 10(10B) or under section 10(10C) of the Act and it would therefore be necessary to refer to the relevant provisions which have a bearing on the matter under consideration.

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.”

10. Section 10(10B) talks about compensation received by a workman at the time of his retrenchment. It has been clarified that compensation received by a workman at the time of closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment. It has been provided that such compensation could be determined and paid to the workman either under the Industrial Disputes Act of 1947 or under any other Act or Rules, orders or notifications issued there under or under any standing orders or under any award, contract of service or otherwise. Thus, the determination and payment of compensation doesn’t necessarily be as per the Industrial Disputes Act and it could be under any other Act, rules, orders, instructions, award, etc. Further, it has been specifically provided that there could be a scheme which the Central Government may approve in this behalf having regard to the need for extending special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances and the workman receives the compensation in accordance with the scheme so approved. Further, depending upon whether the compensation is determined as per the Industrial Disputes Act or otherwise, the quantum of compensation so determined and received by the workman shall not exceed five lakh rupees. However, in case, where the scheme is specifically approved by the Central Government and the compensation is paid as per the scheme so approved, the limitation on quantum of exemption to the extent of five lakh rupees shall not apply and thus, whole of the compensation so received shall be exempt.

11. 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.

12. 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 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.

“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.

31. 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 (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 in terms of the first proviso under Section 10(10B) 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(108).

32. 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.

(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 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.

“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 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.

2. 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.”

"5.2. Held: I have gone through the facts of the case and written submission filed by the appellant and assessment record. Brief facts of the case are that appellant is one of the employees of the HMTL-TD. This Tractor Division/Unit of HMTL was a loss-making Central Government Public Sector Undertaking for the last several years. Government of India in its Cabinet Meeting dated 27th October 2016 approved budgetary support to HMTL for payment of outstanding salary, introduction of VRS/VSS and closure of operations of Tractor Division. A press release was also issued on the same day. In compliance to this, an Office Order No. 15/16 dated 4th November 2016 regarding VRS/ VSS scheme was announced by HMTL Bangalore for all the permanent employees who were on the rolls of Tractor Division as on that date. That scheme further envisages that employees not opting for VRS would be retrenched under the Industrial Disputes Act, 1947 as the Tractor Division is proposed to be closed down. Tax was deducted at source on compensation received at the time of VRS Appellant by way of revised return claimed that the said compensation is exempt under Second proviso and first explanation of Section 10(108) of Act. For this appellant placed reliance on the case of Hindustan Photo Film Workers Vs. The Government of India WP No.18566 of 2015 dated 17.03.2017. AO on the other hand held that facts of the above case are different than the present case and disallowed claim of the appellant made u/s 10(10B) of the Act on following findings that (1) sum received by the appellant on account of VRSNSS was not of the nature of compensation on termination of employment or compensation on closure of industry ie HMTL-TD. This amount is receipt on account of voluntary retirement, (ii) appellant was not retrenched in accordance with provisions of Industrial Dispute Act, 1947(1 D Act) or under any other Act or award in terms of section 10(108). The order under Industrial Dispute Act 1947 in the case HMT Ltd was passed on 14.2.2017 whereas the appellant accepted the VRS/VSS introduced on 4.11.2016. The appellant had not received payment pursuant to award under I.D.Act, 1947, hence the appellant is also not covered by the explanation (a) to section 10(10B), (ii) the case of the appellant does not fall under the second proviso to section 10(108) as the VRSVSS amount received by him was not of the nature of compensation as the Central Government's offer of VRSVSS announced on 27.10.2016 does not suggest that it was introduced having regard to the need for extending special protection to the employees of HMTL-TD, (iv) the case of the appellant is covered by provisions of section 10(10C) of the Act as he had opted the scheme voluntarily and he has not furnished any evidence opposing the scheme of VRS/VSS Further, the scheme also provided that employees not opting for VRS/VSS shall be retrenched. Since, the appellant has not been retrenched the amount received by him is of the nature of receipt on voluntary retirement or voluntary separation and accordingly, he is entitled to exemption of Rs.5,00,000/- out of the VRS/VSS receipts AO made addition of Rs.23,12,978/- in the total taxable income of the appellant.

5.2.1. Both these Public Sector Undertakings (PSU) ie. HPF & HMTL-TD are monitored by the Department Heavy Industries (DHI), Government of India. Most of the PSUs except BHEL are loss making undertakings for the last several years. DHI has tried its best to revive these units but off late took a considered view that loss making PSUs be closed as these are even not in a position to pay salary/wages of workers on its own. Every quarter these PSUS require budgetary support from Government of India to pay dues of employees/workers though it is not their (PSU) right. VRS/WSS of HMTL-TD is also result of these facts and circumstances. This intent and purpose is also emanating from the Press release dated 27.10.2016 issued wherein it is stressed that Cabinet approves Budgetary support to HMT Ltd for payment of outstanding salary, introduction of VRS/VSS and closure of operations of Tractor Division, Transfer of land to Government entities have been approved. Press release states that HMTL, 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 has 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 liberalization 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-utilization 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 HMTL 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. It is further stated that 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 like Terminal benefits, PF, Gratuity, Leave encashment etc. are also pending for the employees of other Divisions of HMTL i.e. 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. Salient features of the press release are that (1) the Union Cabinet has approved the budgetary support to HMTL for payment of outstanding salary/wages and other employee related dues. It also approved closure of HMT Tractor Division by offering attractive VRS/VSS at 2007 notional pay scales, (ii) It will have a financial implication (cash outgo) of Rs 718.72 crore for payment of outstanding salary, wages and statutory dues, VRS/VSS ex-gratia payments and cleaning of Tractor Division's liabilities towards Bank, creditors etc., and (ii) the Cabinet has also given its approval for transfer of selected small parcels of HMT land at Banglore and Kochi to different Government entities for their use in larger public interest. These facts and circumstances clearly lead to the closure of HMTL-TD and employees who do not opt for VRS/VSS will be retrenched. The logical corollary is that if none of the employees opt for VRS/VSS they will sure shot be retrenched. Of course some of the employees were not in favour of VRS Scheme as at this age nobody would get second job so they were interested in transfer and 150 persons who have not opted for VRS were retrenched by the Government subsequently and their cases are still pending with Punjab and Haryana High Court. Hence, it was a case of forced VRS on the employees as they have no choice.

5.2.2. Let's understand the facts of VRS package of Hindustan Photo Film Workers (HPF) and HMTL-TD as per comparative chart given below.

5.2.3. The facts, intend and purpose of HMTL-TD are identical with the facts of HPF.Ld. AO has failed to appreciate finer details and observations of the Hon'ble Madras High Court when the Court observes that the package is not a VRS but a case of closure. It is true that the package is called "VRS" but the nomenclature of the package would be irrelevant, but what would be relevant is purpose for which the package has been sanctioned. There is no option available to the employees as the company has been closed down and therefore, the quantum which is sought to be given to the employees should be construed as compensation for closure. The package dated 28.02.2014, sanctioned for employees of HPF, is special package exclusively dedicated and designed for the employees of HPF. The VRS Scheme for the employees of HMTL-TD is also exclusive and specific package for the Tractor Division, Pinjore The earmarked money under budgetary support to HMTL for payment of outstanding salary / wages and other employee related dues and also for closure of HMT Tractor Division by offering attractive VRS/VSS at 2007 notional pay scales. Thus funds have been earmarked for a specific purpose. As per facts and circumstances described in detail in the Press release under the head "Background", the employees can hardly resist to take a stand against the said package This view is further strengthened, if we peruse that in financial year 2016- 17, 850 employees of HMTL-TD took VRS and 150 employees who did not offer for VRS were retrenched in January 2018. Hence, VRS scheme must be read in the nature of retrenchment compensation/ compensation on termination of employment on account of closure of HMTL-TD. The purpose behind this scheme in no uncertain terms is to rehabilitate the employees of HMTL-TD. 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 it fit to offer this package to enable the employees to come out of the financial crises. This view eloquently emerges, if we carefully peruse the intent and purpose behind the scheme. It is to reiterate that in the said press release, it is categorically stated that 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 November, 2013. The statutory dues like Terminal benefits, PF, Gratuity. Leave encashment etc. are also pending for the employees of other Divisions of HMTL ie. 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. In view of these facts and circumstances and by placing reliance on the case of HPF supra (SLP filed by the Union Government has also been dismissed by the Hon'ble Supreme Court], it is my considered opinion that the compensation received by the appellant at the time of VRS qualifies the parameters laid down under section 10 (10B) of Act. AO is directed to delete the addition. The Grounds of Appeal

Nos.1 &2 are allowed."

19. Having purused the aforesaid material available on record, we have no hesitation but to agree with the aforesaid findings of the ld CIT(A). The ld CIT(A) has rightly held that the money has been earmarked under budgetary support by the Government of India to HMT for payment of outstanding salary / wages and other employee related dues and also for closure of HMT Tractor Division by offering attractive VRS/VSS at 2007 notional pay scales. It has been rightly held that the purpose behind this scheme in no uncertain terms is to rehabilitate the employees of HMTL-TD as 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 it 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 as 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 HMT. The ld CIT(A) has rightly held that the facts of the present case are pari-materia with that of Hindustan Photo Films (Supra) which has been decided by the Hon’ble Madras High Court and the matter therein has attained finality in view of dismissal of the SLP by the Hon’ble Supreme Court. Therefore, in light of the same, we are of the considered view that in the instant case, the whole of the amount of voluntary retirement compensation would be exempted from income tax in terms of the second proviso to Section 10(10B) of the Act.

20. Subsequently, following the decision in case of Shri Prem Pal (Supra), in case of Shri Karam Pal (Supra), the Ld. CIT(A), Panchkula vide his order dt. 31/01/2020 pertaining to the A.Y. 2017-18, has again decided the matter in favour of the assessee.

21. Further, the Ld. CIT(A), NFAC, Delhi in case of Shri Raj Kumar Singh pertaining to A.Y 2017-18 vide order dt. 18/08/2021 has again decided the matter allowing the exemption under section 10(10B) of the Act and the relevant findings reads as under: “7. In this case, the appellant had opted for Voluntary Retirement Scheme introduced by HMT Ltd, on closure of its Tractor Division in Bellary Road, Bangalore in the year 2016. The appellant had received Voluntary Retirement benefits and filed the return of income declaring total income at Rs.57,86,720/- after Chapter VIA deductions and claimed rebate u/s. 89 of the I.T. Act, 1961. Accordingly, the CPC, Bengaluru has processed the return, treating the VR benefit as part of total income.

, is allowed.”

22. Similarly, in case of Shri Kedar Singh Mewari, the Ld. CIT(A), NFAC Delhi vide its order dt. 31/03/2021 pertaining to A.Y 2017-18 has decided the matter in favour of the assessee and the relevant findings are contained at para 4.2 to 4.9 which read as under: “4.2 The appellant was working as Deputy Manager, Finance, with HMT watches Ltd, Ranibagh. On 06/01/2016, the Cabinet Committee on Economic Affairs, chaired by the Prime Minister, Shri Narendra Modi, gave its approval for offering VRS package to mitigate the hardships being faced by the employees of HMT Watches Ltd. This was announced through a press release by the Government of India. According to this scheme of compensation, the appellant received an amount of Rs. 24,06,050/- as the compensation amount during the Assessment Year 2017-18. 4.3 The Assessing Officer observed that the appellant's case would neither fall under section 10(10C) of the Income Tax Act nor under section 10(108) of the Act. The Assessing Officer observed that the compensation scheme was not in conformity with the prescribed guidelines as mentioned in section 10(10C) of the Act, read with the Rule 2BA of the IT Rules, 1962. Further, the Assessing Officer observed that no material was brought on record by the appellant that such a scheme was notified by the Central Government in the official Gazette for the purpose of granting exemption from taxation under section 10(10B) of the Act. 4.4 Appellant pleaded that the compensation received at the time of closure of the factory clearly fell under the provisions of section 10(10B) of the Act. Appellant also brought to the notice that under similar circumstances the courts held that the package received by the workmen's compensation pursuant to the decision taken by the Central Government to offer special protection to the employees, stand exempted from direction of income tax. Appellant relied on the decision in the case of Hindustan Photo Films, in written appeal numbers 616 and 753 to 758 of 2017 and C.M.P Nos. 10332 to 10337 of 2017 double judge bench order dated 29/06/2017. Appellant also relied on the Supreme Court judgement in order dated 19/02/2018 SLP (Civil) Diary No(s). 37247/2017. 4.5 Appellant's submissions were carefully considered. It is clear that the appellant received the compensation amount subsequent to the closure of his employer, HMT watches Ltd, Ranibagh. The closure of the company and subsequent compensation to employees was made according to the decision of the Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Ministerp Shri Narendra Modi, vide press notification dated 06/01/2016, by the Government of India. 4.6 Section 10(10B) of the Income Tax Act, 1961 exempts 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 retrenchment. The first proviso to section 10(10B) provides certain restrictions and limits the amount of exemption under this section. However the second proviso to section 10(10B) reads as under: "provided further that the preceding proviso shall not apply in respect of any compensation received by a work man 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 which such a scheme applies and other relevant circumstances, up to in this behalf." From the above reading of the section, it can be clearly seen that the appellant's case clearly falls within the provisions of section 10(10B) of the Act. 4.7 The Assessing Officer observed that no material was brought on record by the appellant that such a scheme was notified by the Central Government in the official Gazette for the purpose of granting exemption from taxation under the said proviso. The Observation of the Assessing Officer is not in accordance with the law. There is no such condition laid in the said proviso that the scheme should be notified in the official Gazette. The Assessing Officer is not correct in forcibly including a condition, which is not mentioned in the Act. The proviso says that" in accordance with any scheme which the Central government may approve". In the appellant's case, the Central Government has approved the scheme, as observed in the press release dated 06/01/2016. Thus, the appellant becomes eligible for the exemption provided under section 10(10B) of the Act. Reliance is placed on the decision in the case of [2017] 79 taxmann.com 298 (Madras) HIGH COURT OF MADRAS, Hindustan Photo Film Workers' Welfare Centre (CITU) v. Government of India, New Delhi. 4.8 The Hon'ble High Court, observed as under: "30. 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.

7. In her rejoinder, the ld AR submitted that even though the said claim was not made by the assessee while filing the return of income, at the same time, as soon as the assessee was ceased of the matter that he is eligible for such claim, he has raised the said claim as part of the grounds of appeal

before the ld CIT(A) and it was submitted that where all facts are on record, the ld CIT(A) ought to have examined the said claim being a legal claim and allowed the necessary relief to the assessee more so, where similar claim has been allowed by the ld CIT(A) in other cases.

8. We have heard the rival contentions and perused the material available on the record. We agree with the contention of the ld AR that whether the assessee is eligible for deduction u/s 10(10B) or not, being a legal claim, the said claim can be raised during the proceedings before the ld CIT(A) as well as before this Tribunal. Further, on merits, we find that admittedly the facts are pari- materia and the matter relating to exemption under section 10(10B) has been extensively discussed by the Coordinate Bench in case of Shri Suresh Pal Chauhan Vs. ITO and others (Supra) and following the same, the assessee is held eligible for exemption under section 10(10B) on whole of the amount received on VRS compensation amounting to Rs. 26,33,510/- and the AO is directed to allow the necessary relief to the assessee. In the result, Ground No. 2 of the assessee is allowed.

9. In Ground No. 3, the assessee has raised the ground relating to gratuity amount received as the part of retrenchment compensation be allowed exemption under section 10(10B) of the Act instead of 10(10) of the Act. The said ground is hereby dismissed as withdrawn.

10. In the additional ground of appeal, the assessee has submitted that in respect of taxable portion of gratuity, necessary relief be provided to the assessee u/s 89(1) of the Act.