2005 AIR Kant HCR 2594 ::2005 Tax LR 940 ::2005 (198) Cur Tax Rep 209 ::2005 (59) Kant LJ (Trib) 609 ::(2005) 279 ITR 402 ::(2005) 149 Taxman 82 ::(2006) 191 Taxation 22

Karnataka High Court

Hon'ble Judge(s): H. L. Dattu, H. N. Nagamohan Das , JJ

Income-Tax Act (43 of 1961) , S. 17(1)(iv), S.017(1)(iv)(3), S.10 (10-C)— Income from salaries - Exempted income - "Profits in lieu of salary" - Includes amount received by assessee employee as per Voluntary Retirement Scheme (VRS) floated by bank - Ex gratia amount over and above prescribed limit (5 lacs) is taxable - But, rate of tax will vary by virtue of S. 89(1) - Words 'any compensation' qua termination of employment - Scope and connotation of. The assessee in the instant case, has received ex-gratia payment from his employer under the Voluntary Retirement Scheme. The amount so received to the extent prescribed under S. 10(10-C) of the Act is exempt from payment of tax. The amount over and above the prescribed limit is taxable under S. 17(3) of the Act as "profits in lieu of salary". The amount so received cannot be termed as salary or advance salary, but an amount of compensation received by the assessee from his employer or former employer in connection with the termination of his employment. Once it is not in dispute that the amount if taxable not as arrears of salary or advance salary, but profits in lieu of salary, as provided under S. 17(3) of the Act, it is eligible for relief under S. 89(1) of the Act whether the said amount is received under the Voluntary Retirement Scheme or it has been granted exemption under S. 10(10-C) of the Act to the ex....