(337.2 KiB, 260 DLs)

S. 10 (10C) exemption available to VRS installment payments

S. 10 (10C) provides that the amount received by an employee on voluntary retirement shall be exempt up to a limit of Rs. 5 lakhs. It was amended by the FA 2003 w.e.f 1.4.2004 to provide that even amounts “receivable” were entitled to the exemption. On the question whether the said amendment applied to earlier years HELD:

(1) S. 10 (lOC) was inserted in order to make voluntary retirement more attractive and beneficial to employees so as to secure economic viability of companies. Therefore, this has to be interpreted in a manner beneficial to the employee.

(2) A statute has to be interpreted having regard to the object and purpose of its’ enactment. A provision for deduction, exemption or relief should be construed reasonably and in favour of the assessee.

(3) It is a well recognized principle that subsequent legislation may be looked at in order to see what is the proper interpretation to be put upon the earlier Act where the earlier Act is obscure or ambiguous or readily capable of more than one interpretation.

(4) It could not be the intention of the legislature that the benefit of s. 10 (10C) should be restricted in the case of employees who retired before 1.4.2004 only to the sum actually received while employees who retired subsequently will get the benefit also in respect of amounts payable in subsequent financial years.

(5) Accordingly, the amendment is was clarificatory and curative in nature and applies even to employees who retired prior to 1.4.2004 and received VRS in installments.

(422.3 KiB, 324 DLs)

U/s 260A, High Court has no power to condone delay

S. 260A permits the filing of an appeal to the High Court within 120 days. In Hongo India 236 E.L.T. 417 and Chaudharana Steels 238 E.L.T. 705, the Supreme Court held in the context of sections 35H & 35G of the Excise Act, that in the absence of specific powers, the High Court has no power to condone delay. On the question whether the said judgement of the Supreme Court would apply to s. 260A as well, HELD:

The Income-tax Act is a special law. The nature of the remedy provided therein are such that the legislature intended it to be a complete code by itself which alone should govern the several matters provided by it. The scheme of the Income-tax Act supports the conclusion that the time limit prescribed u/s 260A to file an appeal before the High Court is absolute and unextendable by court u/s 5 of the Limitation Act and the limitation cannot be extended by invoking the provisions of s. 5 of the Limitation Act. Since the appeals were filed beyond the prescribed period of 120 days they had to be dismissed on the ground of limitation.

(348.6 KiB, 380 DLs)

Even expenditure incurred prior to set up of project office is allowable

The assessee was a foreign company. It was awarded a contract in India on 24.2.1998. The actual work of basic engineering etc started in March 1998 though the RBI’s approval for setting up the project office was given in June 1998. The assessee incurred expenditure for the period 1.4.1998 to 16.6.1998 and the question arose whether the same having been incurred before the setting up of the project office was “prior-period expenditure” and could be allowed as a deduction. HELD, upholding the claim:

It is beyond comprehension how expenditure incurred on the project itself can be disallowed on the ground that it was incurred prior to setting up the project office. When computing the income of the project as a whole including that part which relates to the period anterior to the setting up of the project office, there can be no question of not allowing such expenditure which is relatable to the period prior to the setting up of the project. If the expenditure is identifiable with the project, it has to be allowed as a deduction under the matching concept.

(478.5 KiB, 500 DLs)

Non-residents are eligible for the benefit of second proviso to s. 112

The assessee was a non-resident. It earned long-term capital gains on sale of shares. The Proviso to s. 112 provides that if the tax payable on LTCG exceeds 10% before indexation under the second proviso to s. 48, the excess shall be ignored. As non-residents who bought shares in foreign currency are not eligible to the benefit of indexation, the question arose whether the benefit of the proviso to s. 112 can be given to the assessee. HELD, upholding the assessee’s stand that:

The fact that the proviso to s. 112 uses the words ‘before giving effect to the second proviso to s. 48′ does not mean that the benefit of the lower rate can be given only to those cases eligible for the indexation benefit. Even non-residents who are not eligible for indexation are eligible for the lower rate of 10%.