Ashok Raghunathrao Kulkarni Vs ITO (ITAT Pune)
The Pune Bench of the Income Tax Appellate Tribunal considered the assessee’s appeal against the order dated 06.12.2023 passed by the Commissioner of Income Tax (Appeals)/NFAC for Assessment Year 2019-20. The dispute arose from the denial of relief under Section 89 of the Income-tax Act, 1961 and the treatment of ₹57,12,674 received by the assessee under the Financial Scheme introduced by Pfizer Healthcare India Pvt. Ltd. as profits in lieu of salary under Section 17(3). The assessee contended that the claim under Section 89 had been withdrawn during assessment proceedings and that the amounts received under the scheme constituted capital receipts arising from premature cessation of employment and loss of the source of income.
The assessee had filed the return declaring total income of ₹61,10,370 and claimed relief under Section 89 on ₹57,12,674 treated as salary received in advance. The amount comprised ex-gratia (severance pay), early bird and group participation incentives, notice period payout, medical reimbursement, bonus, earned leave encashment and part salary for the month of relieving. During assessment, the assessee submitted that Pfizer Healthcare India Pvt. Ltd. had closed its Aurangabad plant due to significant long-term loss of product demand and introduced a voluntary Financial Scheme for permanent employees. The assessee alternatively requested the Assessing Officer to treat the receipts as capital receipts. The Assessing Officer rejected the claim, treated the ex-gratia and related payments as profits in lieu of salary under Section 17(3), and disallowed relief under Section 89. The CIT(A)/NFAC upheld the assessment, observing that the amounts were paid under a voluntary retirement scheme and were taxable as salary.
