Voluntary payment by employer out of appreciation is outside rigours of section 17(3)(iii)

Mahadev Vasant Dhangekar Vs ACIT (ITAT Pune)

ITAT Pune held that payment made voluntarily by the employer out of appreciation for the employee falls outside the rigours of Section 17(3)(iii) of the Income Tax Act.

Facts- The assessee has taken voluntary retirement from Racold Thermo Private Limited Pune during the year under consideration. Thereafter the assessee has started trading business of Industrial consumable supply in the name of M/s. Laxmi Enterprises. The assessee received Rs. 47,21,154/- from the company as Ex-Gratia and from this amount claimed Rs. 5,00,000/- u/s 10(10C) VRS compensation/Termination of service and balance remaining amount of Rs. 42,21,154 from Ex-Gratia taken as capital receipt.

The amount of Rs. 42,21,154 was brought within the purview of taxation u/s 17(3)(iii) of the Income Tax Act.

Conclusion- We are of the considered view, therefore, in this case, when the employer itself stated that the payment has been made voluntarily by them out of appreciation for the employee thus falls outside the rigours of section 17(3)(iii) of the Act. In view thereof, we set aside the order of the NFAC and direct the ld. A.O to delete the addition from the hands of the assessee. The grounds of appeal of the assessee are allowed.

Please become a Premium member. If you are already a Premium member, login here to access the full content.