Case Law Details
Delhi ITAT in the case of Sony India Pvt. Ltd. Vs. ACIT [I.T.A. Nos. 4008, 4114 & 4994(Del)/2010] held that deduction in respect of expenses incurred pursuant to a Voluntary Retirement Scheme can be claimed under section 35DDA of the Income-tax Act, 1961 even if the scheme is not in accordance with the guidelines prescribed under section10 (10C) of the Act read with Rule 2BA of the Income-tax Rules, 1962.
Section 35DDA of the Act provides for deduction of expenses incurred on VRS over a period of five years. However no conditions/guidelines have been prescribed as to the eligibility of VRS for the purposes of availing the deduction. Section io(ioC) of the Act provides for exemption of compensation received by an employee pursuant to VRS, provided the same is in accordance with the guidelines prescribed under Rule 2BA of the Rules.
Facts
• Sony India Pvt. Ltd. (“the assessee”) is engaged in manufacturing and trading business. During the financial year 2004-05, it had shut down its manufacturing operations at its unit in Dharuhera. It floated a VRS known as “Employees Voluntary Retirement Scheme — 2004” applicable only to the employees of the closed unit and claimed one-fifth of the VRS expenditure incurred as a deduction under section 35DDA of the Act.
• The Assessing Officer (“AO”) disallowed the assessee’s claim on the following grounds:
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