S. Venugopal vs Commissioner of Income Tax

Huluvadi G. Ramesh, J.—Petitioner, on taking voluntary retirement from ICICI Bank, sought to claim exemption u/s 10(10C) of the Income Tax Act, 1961 and also filed returns claiming exemption of Rs. 5 lakhs out of the total benefits received. The Assessing Officer disallowed the claim of the Petitioner. In the revision filed before the Commissioner, the Commissioner also passed an order on 13.3.2008-annexure 1 rejecting the claim of the Petitioner.

The Commissioner in his order has observed that the scheme of voluntary retirement has been drawn to result in over all reduction of the existing strength of employees and the vacancies caused by such voluntary retirement is not filled up. Having noted the Scheme evolved by the Bank, the Commissioner has opined, the capability and skill enhancement of employees requires priority attention as per the object of the Bank. Most of the employees who were in the organisation for a long period were expressing desire to have an option for an early exit and, in that background, in the competitive environment such a Scheme has been introduced. Taking note of the Scheme evolved by the Bank, the Commissioner has opined that the Bank intended to enroll more capable and skilled employees in the organisation to cope up with the competition in the banking sector. As such, the Scheme was introduced not with an intention to reduce the existing strength of the bank, but it was introduced in response to a competitive environment. Further, the condition stipulated in Rule 2BA of the Act for voluntary retirement scheme is, the vacancy caused so, is not to be filled up. However, the idea behind the Scheme is only to reduce the strength and also to recruit capable and skilled employees in their place. Thus, concurring with the finding of the Assessing Officer, the Commissioner has opined that it is not in accordance with Rule 2BA of the Act and disallowed the claim of exemption sought by the Petitioner u/s 10(10C) of the Act. Hence, the Petitioner is before this Court.

Heard the counsel representing the parties.

I he Petitioner''s counsel is assailing the order of the Assessing Officer as well as of the Commissioner on the ground that the Madras High Court in similar situation in the case of A.L. Sethuraman v. Asst. Commissioner of Income Tax, Chennai-Tax Case (Appeal) No. 1311/2009, has extended exemption on the retirement benefits despite the fact whether the management of LOCI Bank has introduced the Scheme of retirement voluntarily or due to some other reason, by setting aside the order of the Tribunal as well as that of the Assessing Authority and the Revisional Authority.

In view of the above decision, it is for the Revenue to consider whether the Petitioner is entitled for exemption as provided u/s 10(10C) of the Act en the amount of voluntary retirement benefit received and the returns filed thereon and the exemption of tax to the extent of Rs. 5 lakhs out of the compensation received. All contentions are left open to be urged. Petitioner to approach the Assessing Authority shall consider the case keeping in view the Madras High Court judgment cited above, and pass orders.

Petition is disposed of accordingly.