High Court Dismisses Revenue's Appeal, Upholds Consistency in Tax Law Application

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Case Name:

Commissioner of Income Tax Vs Vijay G. Patil (High Court of Bombay)

Income Tax Appeal No.303 of 2013

Key Takeaways:

1. The Revenue must be consistent in applying tax laws and cannot differentiate between assessees.

2. If the Revenue accepts a Tribunal decision by not appealing, it cannot challenge subsequent similar orders.

3. The High Court may dismiss appeals and impose costs if the Revenue continues to press appeals inconsistently.

Issue:

Whether the ITAT was justified in upholding the assessee's claim for exemption under section 10(10C) (of Income Tax Act, 1961) for voluntary retirement benefits received from State Bank of India?

Facts:

- The respondent-assessee was an employee of State Bank of India who retired voluntarily under the Exit Option Scheme.

- For the Assessment Year 2007-08, the assessee claimed exemption under Section 10(10C) (of Income Tax Act, 1961) for the amount received on voluntary retirement.

- The Assessing Officer rejected this claim based on a CBDT circular dated 8th October 2009.

- The CIT(A) set aside the Assessing Officer's order, relying on previous court decisions.

- The ITAT upheld the CIT(A)'s order, referring to its earlier decision in ITO v/s. Javerilal D. Chhajed.

Arguments:

- The Revenue argued that the ITAT erroneously relied on previous decisions and that the Exit Option Scheme did not fulfill all conditions laid down in Rule 2BA (of Income Tax Rules, 1962).

- The Revenue questioned whether partial satisfaction of Rule 2BA (of Income Tax Rules, 1962) would entitle an assessee to relief under section 10(10C) (of Income Tax Act, 1961).

Key Legal Precedents:

- CIT v/s. Koodathil Kallyatan Ambujakshan 309 ITR 113

- Chandra Ranganathan and others v/s. CIT 326 ITR 49

- U.O.I. v/s. Kamudini N. Dalal 247 ITR 219

- CIT v/s. Surya Herbal 350 ITR 300

Judgement:

The High Court dismissed the appeal, stating that:

1. The Revenue had accepted the Tribunal's decision in Javerilal D. Chhajed's case and did not appeal against it.

2. It is not open for the Revenue to challenge a subsequent order on an identical matter after accepting a previous one.

3. The law should be uniformly applied and cannot change depending on the person affected.

FAQs:

Q1: Why did the High Court dismiss the appeal?

A1: The court dismissed the appeal because the Revenue had previously accepted a similar decision by the Tribunal and did not appeal against it. The court emphasized the need for consistency in applying tax laws.

Q2: What is the significance of this judgment for taxpayers?

A2: This judgment reinforces the principle that tax laws should be applied uniformly across all assessees. It provides protection to taxpayers against inconsistent application of tax laws by the Revenue.

Q3: What warning did the High Court issue to the Revenue?

A3: The court warned that it might not only dismiss appeals but also impose costs on the Commissioner of Income Tax if they continue to press appeals inconsistently with their previous actions.

Q4: How does this judgment affect the interpretation of Section 10(10C) (of Income Tax Act, 1961)?

A4: While the court didn't directly address the interpretation of Section 10(10C) (of Income Tax Act, 1961), it upheld the ITAT's decision allowing the exemption, suggesting a favorable interpretation for assessees claiming this exemption under voluntary retirement schemes.

Q5: What should the Revenue do before filing an appeal in similar cases in the future?

A5: The Revenue should set out reasons pointing out the distinguishing features that warrant filing an appeal, especially if they have accepted a similar decision previously.

1. This Appeal under Section 260 (of Income Tax Act, 1961)­A of the Income Tax Act, 1961 (the Act), challenges the order dated 29th August, 2012 passed by the Income Tax Appellate Tribunal (the ITAT) for the Assessment Year 2007­-08.

2. The Revenue has formulated the following questions of law for our consideration:

“(a) Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in law in upholding the claim of the assessee for exemption under section 10(10C) (of Income Tax Act, 1961) by erroneously relying on the decision given in Commissioner of Income Tax v/s. Koodathi Kallyatan Ambujakshan (reported in 219 CTR 80) given in the context of Exit Option Scheme for R.

B. I. employees wherein the Hon'ble Bombay High Court had examined the scheme, and found it to be complaint with all the conditions laid down in rule 2BA (of Income Tax Rules, 1962) of I. T. Rules, 1962 whereas, in the instant case the Exit Option Scheme of S. B. I. employees do not fulfill all the conditions laid down in Rule 2BA (of Income Tax Rules, 1962) r.w.s. 10(10C) (of Income Tax Act, 1961) of the I. T. Act, 1961?”

(b) Whether or not, partial satisfaction of Rule 2BA (of Income Tax Rules, 1962) of the I. T. Rules 1962 would entitle an assessee to relief under section 10(10C) (of Income Tax Act, 1961)?”

3. The Respondent­Assessee was an employee of State Bank of India who retired voluntarily as per the Exist Option Scheme announced by the Bank. For the Assessment Year 2007­08, the Respondent­Assessee filed its return of income, claiming exemption under Section 10(10C) (of Income Tax Act, 1961) in respect of amount received by the Respondent­Assessee on his voluntarily retirement.

4. O 18th December, 2009, the Assessing Officer by order passed under Section 143(3) (of Income Tax Act, 1961) rejected the Petitioner's claim for exemption under Section 10(10C) (of Income Tax Act, 1961) by placing reliance upon the circular dated 8th October 2009 issued by the Central Board for Direct Tax (CBDT) wherein it has been observed as under:­

“ It has been observed that the State Bank of Patiala and State Bank of India are offering Exit Option Schemes to employees of various grades in the management of the Bank. These schemes clearly lay out that they are not eligible for deduction under section 10(10C) (of Income Tax Act, 1961), 1961. Some of the employees who have availed of these schemes are nevertheless claiming exemption of the benefits received from such scheme under section 10(10C) (of Income Tax Act, 1961)”

5. In appeal, the Commissioner of Income Tax (Appeals) [CIT(A)], by order dated 16th June, 2011 set aside the order of the Assessing Officer by holding that issue stands covered by the decision of this Court in CIT v/s. Koodathil Kallyatan Ambujakshan 309 ITR 113 and the decision of the Supreme Court in Chandra Ranganathan and others v/s. CIT 326 ITR 49. Besides, reliance was also placed upon the decisions of the Tribunal, inter alia, upon one Petric I. Britto & Others v/s. ITO ITA No. 4413/Mumbai/2006 wherein it has been held that even when the voluntarily separation scheme is not in conformity in the requirement of Rule 2 (of Income Tax Rules, 1962) AB of the Income Tax Rules 1962, yet assessee was entitled to its benefit.

6. On further appeal, the Tribunal by the impugned order upheld the order of the CIT(A) after making a reference to the CBDT circular dated 8th October, 2009 and placing reliance upon its decisions in a case of a ex­employee of State Bank of India in ITO v/s. Javerilal D. Chhajed (ITA No.326/PN/2010) rendered on 8th November, 2011 and dismissed the Revenue's appeal.

7. This appeal was called out for admission on 4th February, 2015. At that time, Mr. Singh, learned Counsel appearing for the Revenue sought time to find out whether or not the Revenue has filed appeal from the decision of the Tribunal in Javerilal D. Chhajed (supra) dated 8th November, 2011 or accepted the same. If accepted, to take instructions to withdraw. Today, Mr. Singh, learned Counsel appearing for the Revenue states that no appeal was filed from the decision of the Javerilal D. Chhajed (supra) as at that point of time, the decision of the Supreme Court rendered in CIT v/s. Surya Herbal 350 ITR 300, according to him was not available. We are unable to understand the above submission as the the Supreme Court rendered its decision in Surya Herbal (supra) on 29th August, 2011 i.e. much before its decision on 8th November, 2011 in Javerilal D. Chhajed (supra). Thus, even though the decision of the Apex Court in Surya Herbal (supra) was very much available, Revenue chose to accept the order of the Pune Bench Tribunal in Javerilal D. Chhajed (supra) and not challenge the same before this Court.

8. In the above view, without going into the other contentions, (although prima facie we are of the view that the Respondent­Assessee is entitled to the benefit) we dismiss the appeal only on the ground that the Revenue having accepted the decision of the Tribunal in Javerilal D. Chhajed (supra), then in an identical matter, it is not open to the Revenue to challenge a subsequent order. The Supreme Court in U.O.I. v/s. Kamudini N. Dalal 247 ITR 219 has held that the Revenue must be consistent and it cannot differentiate between different assessees. This was in the context of a High Court order. The same principle should apply in case of jurisdictional Tribunal order. We are of the view that it is not open to the Revenue to pick and chose the Assessee's against whom they would filed appeal in this Court. The law should be uniformly applied, its application cannot change, depending upon the person affected.

9. We had in fact indicated in our order in CIT v/s. Veena G. Shroff (ITA No.71 of 2013) rendered on 27th January, 2015 that whenever there is a decision of the Tribunal on an identical issue and the Revenue has accepted by not preferring an appeal, then if they seek to file further appeal to this Court from a subsequent order, they must set out the reasons pointing out the distinguishing features in the present case which would warrant filing of appeal notwithstanding the acceptance of an earlier order on the same issue passed by the Tribunal. In this case, the reason made out by the Court for not filing the appeal from order of Tribunal in Javerilal D. Chhajed (supra), was the low tax effect in that case and the decision of the Supreme Court in Surya Herbal (supra) not being available when the decision was rendered in Javerilal D. Chhajed (supra) as pointed out above is factually incorrect.

10. We make it clear that where the Jurisdictional Tribunal has decided the issue by following its earlier decision and no appeal from the earlier decision is filed, unless the memo of appeal or an affidavit filed prior to the hearing indicates the reasons for taking a different view, we shall be constrained to not only dismiss the appeal but also impose costs on the Commissioner of Income Tax who continues to press such appeals.

11. Accordingly, appeal dismissed. No order as to costs.

(G.S.KULKARNI,J.) (M.S.SANKLECHA,J.)