Case Law Details
Rajesh Shantaram Chavan vs. ACIT (ITAT Mumbai)
M/s.Century Textiles and Industries Limited was incurring heavy losses and shut down its Worli Textile Mill Unit in 2008. Around 6300 of its 6600 Mill workers opted for the voluntary retirement scheme, however, 275 workers had opposed for closure of the Mill. Assessee is one of the 275 employees who did not opt for voluntary retirement scheme declared by the company on 13.11.2006. The company in its application to the Labour Commissioner inter-alia offered to pay an ex-gratia amount of compensation to each of the 275 employees provided they accept the closure and termination of their services without agitating the issue or obstructing the development of the entire Mill land. The company offered to earmark a piece of land admeasuring 1.08 acres out of the total Mill land which would not be developed or otherwise dealt with till the entire amount of all the employees have been paid. 3. The above said application was decided by the Labour Commissioner vide his order dated 11.01.2008 granting permission to the company to close down its Textile Mill Unit at Worli. Accordingly, by notice dated 12.01.2008, unit was closed down and services of all the 275 employees terminated w.e.f 12.01.2008. The Government of Maharashtra vide letter no TPB-4308/317/CR/182/08/UD011 dated 30.09.2008 addressed to Municipal Corporation imposed the following conditions on the company, to safeguard the interests of the 275 workers who had not opted for voluntary retirement scheme.
Accordingly, the ex-workers barring a few, entered into individual agreements with the Company confirming the terms and conditions specified above. As per the terms of agreement dated 22/2/2010 between the Company and the individual workers, it was specifically agreed that each of the 275 ex-workmen would be paid an ex-gratia amount per month on the condition that they would not obstruct the development of the entire Mill land (except 1.08 acres of land). By the agreement, the ex-worker accepted the closure of the Mill and also accepted their consequent termination of service and also agreed that they be treated as left employment and has having given up their right of employment. Clause 7 of the agreement also specified that any time in the future, if the Second party, ie, the individual worker, decided to accept a lump sum amount in lieu of the amount agreed to be paid, then both parties would be free to settle the same mutually. The Company entered into a Supplementary Agreement dated 25/11/2016 individually with the ex-workers with the aim of settling the matter forever whereby, each exworker agreed to accept a lump sum amount in lieu of the remaining years of service up to 63 years of age. As per the terms of the agreement, the assessee has agreed to fore-go all rights, title or interest in the earmarked land of 1.08 acres and the Company shall continue to be the absolute owner of the earmarked land. The Company also confirmed that the one time lump sum ex-gratia amount was towards full and final settlement and no claim would lie against any remuneration, compensation, ex-gratia or any other benefits.
In accordance with the Supplementary agreement dated 25/11/2016, the Company has computed the total dues payable by the Company to the assessee till he attains 63 years of age to be ₹.59,61,483/-. The company has paid the ‘one time lump-sum ex-gratia amount’ of ₹.42,66,844/- after deducting income tax of ₹.16,94,639/- as per the provisions of Section 192 of the Act. The Company in the said agreement has explained that the one time lump sum ex-gratia amount is deemed ‘salary’ paid to an exemployee in advance within the meaning of the provisions of the Act, it has therefore, deducted tax at source in accordance with the relevant provisions of the income tax act, 1961, as stated above. Form 16 has been duly issued to the assessee by the Company for the relevant F.Y 2016-17 certifying deduction of tax. In the return of income for the A.Y 2017-18, the assessee has claimed relief u/s.89(1) of the I.T.Act, 1961 on the compensation received by him, duly uploading Form 10E along with the ITR filed on the e-filing site. The total income declared is ₹.61,13,070/- with tax of ₹.16,94,639/-. Relief u/s.89(1) has been claimed as ₹.16,74,250/-. The assessee has also submitted the computation chart of the compensation as provided by the Company. As per the computation chart, for F.Y. 2016-17, the assessee received monthly payment as per the terms of agreement dated 26.02.2010. For the month of November 2016, a total amount of ₹.59,61,483/- is shown. The chart also gives a year-wise break-up of the computation of the lumpsum amount, on the basis of amount payable to the assessee from F.Y 2016-17 till F.Y 2036-37, when he attains 63 years of age.
Ld. AR of the assessee brought to our notice facts of the case in detail and submitted that the amount received by the assessee is whether it falls under salary received in advance or compensation for termination. He brought to our notice Page No. 27 to 736 of the Paper Book to submit that several other employees who also claimed the similar claim u/s. 89 of the Act and in those cases the revenue has accepted that the compensation received by the respective individual are in the form of salary received in advance. He submitted that the case of the assessee is exactly similar to the above cases and revenue cannot take different views on the exactly similar issue.
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