ITO vs. Dhan Sai Srivas (Chhattisgarh High Court)

DATE: (Date of pronouncement)
DATE: August 2, 2009 (Date of publication)

Click here to download the judgement (dhan_sai_voluntary_retirement_10_10C.pdf)

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.

See Also: CIT vs. Koodathil Kallyatan Ambujakshan (2009) 309 ITR 113 (Bom)