My clients settled a wage dispute and took VRS and compensation for loss of future salary in two instalments. The company deducted TDS on the whole amount without giving s.89 relief. Can we make the employer refund it?
No — not from the employer. The Madras High Court held that the employer cannot be found at fault for deducting tax at source in the absence of an application in Form 10E under Rule 21A, because s.192(2A) is what obliges the employer to compute and give s.89 relief and it operates only on the particulars the employee furnishes. The Court's remedy was to direct the employees to file returns under s.139(1) within thirty days and the Income Tax Officer to process them under s.143(1) and refund within two months.
Decided by the High Court (C. Saravanan J) on 2026-06-24, reported as W.P.No.4601 of 2026 and W.M.P.No.5112 of 2026 (Madras High Court); reserved 07.04.2026, pronounced 24.06.2026. It bears on section 89, section 10(10C), section 10(10C)(ii), section 17(3), section 192, section 192(2A), section 139(1), section 143(1), section Rule 21A, section Rule 21AA of the Income Tax Act 1961, in Salary & Perquisites, TDS Defaults, Capital Gains Exemptions and Refunds, Interest & Condonation matters.
This is the practical answer to a very common complaint: the employer has deducted on the gross figure and the employee wants the money back from the employer rather than from the Department. It cannot be done that way, and the writ against the employer will fail even where the receipt is in substance not taxable. Just as important is what the judgment sets out at para 31 and para 28 — the third proviso to s.10(10C) and the proviso to s.89 are two halves of the same 2009 amendment, and they make the s.10(10C) exemption and s.89 relief mutually exclusive on the same voluntary retirement receipt. If relief under s.89 has been allowed for any assessment year on that amount, no exemption under s.10(10C) is available for that or any other assessment year; and conversely s.89 relief is barred where the s.10(10C) exemption has been claimed. Anyone advising on a VRS or separation package after AY 2010-11 must choose one route and say so in writing. Note also that s.10(10C) caps the exemption at five lakh rupees, which the Court's broad statement that the settlement amounts 'are not to be included in the income' does not spell out.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A wage revision dispute between the Hosur Bata Employees Union and Bata India Limited was pending before the Industrial Tribunal, Chennai in O.P. No. 62 of 2025. A settlement agreement dated 10 January 2026 was signed under s.57(1) of the Industrial Relations Code 2020 read with Rule 25 of the Tamil Nadu Industrial Disputes Rules 1958. Under it each of 61 employees was to receive Rs 5,00,000 towards a Voluntary Retirement Scheme and Rs 40,50,000 towards loss of salary for the remaining period of service up to 31 December 2032, the aggregate of Rs 45,50,000 being payable in two instalments on 10 January 2026 and 2 April 2026, together with a one-time payment of Rs 50,000 towards arrears of wage revision for the period 1 December 2023 to 31 December 2025. The settlement recorded that the workmen might submit Form 10E under s.192(2A), that the management would compute the tax payable and deduct at source, and that the workmen were at liberty to avail relief under s.89(1). The company deducted tax on the entire amount and remitted it. The union sought a mandamus directing the Income Tax Officer (TDS) to direct the company to refund the tax wrongfully deducted. The Department also took the objection that no part of the cause of action arose within the Court's territorial jurisdiction, the employer being assessed at Kolkata and Gurugram.
The writ petition was disposed of without any direction against the employer. The Court held that the employer, although aware that the employees might be entitled to relief under s.89 read with s.17(3) and that the amounts might not form part of taxable income, could not be required to grant such relief voluntarily in the absence of an application in Form 10E as contemplated by Rule 21A, this being evident from s.192(2A); the employer therefore acted strictly in accordance with the mandate of the law (paras 34 and 35). Because the amounts might not be taxable in the employees' hands and tax had already been deducted and remitted, the Court directed the employees to file returns under s.139(1) within thirty days of receipt of the order and the second respondent to process them under s.143(1) and refund the appropriate amount within two months (para 36).
The Court read s.10(10C) and s.89 as going hand in hand, the relevant expression in relation to salary being defined in s.17(3), and reproduced all three provisions (paras 30 and 31). It recorded that the third proviso to s.10(10C)(ii), inserted by the Finance (No. 2) Act 2009, is mirrored in the proviso to s.89 inserted by the same amendment, so that the exemption and the relief are alternatives on the same voluntary retirement receipt (para 28). It noted that s.89 grants relief where salary is paid in arrears or in advance or where a payment which under s.17(3) is a profit in lieu of salary is received, and that the section requires an application to be made (para 29), and that Form 10E is prescribed for that purpose under Rule 21A (para 32). Turning to the employer, it held that under s.192(2A) an employee entitled to relief under s.89(1) may furnish particulars to the person responsible for paying, whereupon that person shall compute the relief and take it into account in making the deduction under sub-section (1) (para 33) — the obligation on the employer is therefore triggered by the employee's particulars and not otherwise. The Department's own position, recorded at para 23, was that filing Form 10E does not eliminate the employer's statutory responsibility to deduct, that relief under s.89(1) is to be examined and granted by the Assessing Officer on assessment, and that excess tax deducted can be claimed as a refund. The Court did not decide the territorial jurisdiction objection, disposing of the matter by directing the return and refund route instead.
Therefore, the 3rd and 4th respondents cannot be found at fault, as they acted strictly in accordance with the mandate of the law, although the amounts paid by them to the respective members of the Petitioner Union may not to form part of their taxable income.
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Handle my notice → Ask a CA on WhatsAppNo — not from the employer. The Madras High Court held that the employer cannot be found at fault for deducting tax at source in the absence of an application in Form 10E under Rule 21A, because s.192(2A) is what obliges the employer to compute and give s.89 relief and it operates only on the particulars the employee furnishes. The Court's remedy was to direct the employees to file returns under s.139(1) within thirty days and the Income Tax Officer to process them under s.143(1) and refund within two months. This was decided by the High Court (C. Saravanan J) and bears on section 89, section 10(10C), section 10(10C)(ii), section 17(3), section 192, section 192(2A), section 139(1), section 143(1), section Rule 21A, section Rule 21AA of the Income Tax Act 1961. It is reported as W.P.No.4601 of 2026 and W.M.P.No.5112 of 2026 (Madras High Court); reserved 07.04.2026, pronounced 24.06.2026. This is the practical answer to a very common complaint: the employer has deducted on the gross figure and the employee wants the money back from the employer rather than from the Department. It cannot be done that way, and the writ against the employer will fail even where the receipt is in substance not taxable. Just as important is what the judgment sets out at para 31 and para 28 — the third proviso to s.10(10C) and the proviso to s.89 are two halves of the same 2009 amendment, and they make the s.10(10C) exemption and s.89 relief mutually exclusive on the same voluntary retirement receipt. If relief under s.89 has been allowed for any assessment year on that amount, no exemption under s.10(10C) is available for that or any other assessment year; and conversely s.89 relief is barred where the s.10(10C) exemption has been claimed. Anyone advising on a VRS or separation package after AY 2010-11 must choose one route and say so in writing. Note also that s.10(10C) caps the exemption at five lakh rupees, which the Court's broad statement that the settlement amounts 'are not to be included in the income' does not spell out. If it applies to you, the first step is this: File Form 10E before the return, and file it with the employer under s.192(2A) if you want the relief reflected in the TDS rather than claimed as a refund. Cite the right rule: Form No. 10E is prescribed by Rule 21AA and is headed "[See rule 21AA]", while Rule 21A prescribes the manner of computing the relief. This judgment says at para 32 that "Form 10E has been prescribed under Rule 21A of the Income Tax Rules, 1962", which is a slip — do not carry it into a pleading.
A wage revision dispute between the Hosur Bata Employees Union and Bata India Limited was pending before the Industrial Tribunal, Chennai in O.P. No. 62 of 2025. A settlement agreement dated 10 January 2026 was signed under s.57(1) of the Industrial Relations Code 2020 read with Rule 25 of the Tamil Nadu Industrial Disputes Rules 1958. Under it each of 61 employees was to receive Rs 5,00,000 towards a Voluntary Retirement Scheme and Rs 40,50,000 towards loss of salary for the remaining period of service up to 31 December 2032, the aggregate of Rs 45,50,000 being payable in two instalments on 10 January 2026 and 2 April 2026, together with a one-time payment of Rs 50,000 towards arrears of wage revision for the period 1 December 2023 to 31 December 2025. The settlement recorded that the workmen might submit Form 10E under s.192(2A), that the management would compute the tax payable and deduct at source, and that the workmen were at liberty to avail relief under s.89(1). The company deducted tax on the entire amount and remitted it. The union sought a mandamus directing the Income Tax Officer (TDS) to direct the company to refund the tax wrongfully deducted. The Department also took the objection that no part of the cause of action arose within the Court's territorial jurisdiction, the employer being assessed at Kolkata and Gurugram. The matter was decided on 2026-06-24 by the High Court (C. Saravanan J). On those facts the High Court held as follows. The writ petition was disposed of without any direction against the employer. The Court held that the employer, although aware that the employees might be entitled to relief under s.89 read with s.17(3) and that the amounts might not form part of taxable income, could not be required to grant such relief voluntarily in the absence of an application in Form 10E as contemplated by Rule 21A, this being evident from s.192(2A); the employer therefore acted strictly in accordance with the mandate of the law (paras 34 and 35). Because the amounts might not be taxable in the employees' hands and tax had already been deducted and remitted, the Court directed the employees to file returns under s.139(1) within thirty days of receipt of the order and the second respondent to process them under s.143(1) and refund the appropriate amount within two months (para 36).
The Court read s.10(10C) and s.89 as going hand in hand, the relevant expression in relation to salary being defined in s.17(3), and reproduced all three provisions (paras 30 and 31). It recorded that the third proviso to s.10(10C)(ii), inserted by the Finance (No. 2) Act 2009, is mirrored in the proviso to s.89 inserted by the same amendment, so that the exemption and the relief are alternatives on the same voluntary retirement receipt (para 28). It noted that s.89 grants relief where salary is paid in arrears or in advance or where a payment which under s.17(3) is a profit in lieu of salary is received, and that the section requires an application to be made (para 29), and that Form 10E is prescribed for that purpose under Rule 21A (para 32). Turning to the employer, it held that under s.192(2A) an employee entitled to relief under s.89(1) may furnish particulars to the person responsible for paying, whereupon that person shall compute the relief and take it into account in making the deduction under sub-section (1) (para 33) — the obligation on the employer is therefore triggered by the employee's particulars and not otherwise. The Department's own position, recorded at para 23, was that filing Form 10E does not eliminate the employer's statutory responsibility to deduct, that relief under s.89(1) is to be examined and granted by the Assessing Officer on assessment, and that excess tax deducted can be claimed as a refund. The Court did not decide the territorial jurisdiction objection, disposing of the matter by directing the return and refund route instead. In the words reproduced by the source cited on this page: "Therefore, the 3rd and 4th respondents cannot be found at fault, as they acted strictly in accordance with the mandate of the law, although the amounts paid by them to the respective members of the Petitioner Union may not to form part of their taxable income." The decision followed or applied Commissioner of Income-tax v. G.V. Venugopal, (2005) 273 ITR 307 — cited by the petitioner; Commissioner of Income-tax v. M. Abdul Kareem, (2009) 311 ITR 162 — cited by the petitioner; Syed Jamaluddin Ali v. State Bank of India, (2021) 1 BLJ 152 (Patna) — cited by the employer.
It was decided by the High Court on 2026-06-24 and is reported as W.P.No.4601 of 2026 and W.M.P.No.5112 of 2026 (Madras High Court); reserved 07.04.2026, pronounced 24.06.2026. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 89, section 10(10C), section 10(10C)(ii), section 17(3), section 192, section 192(2A), section 139(1), section 143(1), section Rule 21A, section Rule 21AA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The writ petition was disposed of without any direction against the employer. The Court held that the employer, although aware that the employees might be entitled to relief under s.89 read with s.17(3) and that the amounts might not form part of taxable income, could not be required to grant such relief voluntarily in the absence of an application in Form 10E as contemplated by Rule 21A, this being evident from s.192(2A); the employer therefore acted strictly in accordance with the mandate of the law (paras 34 and 35). Because the amounts might not be taxable in the employees' hands and tax had already been deducted and remitted, the Court directed the employees to file returns under s.139(1) within thirty days of receipt of the order and the second respondent to process them under s.143(1) and refund the appropriate amount within two months (para 36). It arises in Salary & Perquisites, TDS Defaults, Capital Gains Exemptions and Refunds, Interest & Condonation matters, on section 89, section 10(10C), section 10(10C)(ii), section 17(3), section 192, section 192(2A), section 139(1), section 143(1), section Rule 21A, section Rule 21AA of the Income Tax Act 1961, and was decided by C. Saravanan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Choose between s.10(10C) and s.89 on the voluntary retirement or separation amount and record the choice on the file: the third proviso to s.10(10C) forfeits the exemption where s.89 relief has been allowed on that amount for any assessment year, and the proviso to s.89 bars the relief where the s.10(10C) exemption has been claimed. Both provisos come from the Finance (No. 2) Act 2009 and apply from AY 2010-11. Where TDS has already been deducted and remitted, do not sue the employer; file the return under s.139(1), claim the relief or exemption in it, and pursue the refund on processing under s.143(1). Where a settlement or award splits a lump sum across financial years, make sure the settlement deed itself records the Form 10E entitlement and the instalment dates — that recital is what the Court relied on here. Check the s.10(10C) ceiling of five lakh rupees and whether the scheme satisfies Rule 2BA before advising that the whole VRS receipt is outside tax. If the writ route is being considered, check territorial jurisdiction first — the Department took the point here that the employer's assessing jurisdiction lay outside the State.
Validity check could not be completed. Validity check could not be completed. Decided 24 June 2026; no later treatment was searched for. The judgment relies on CIT v. G.V. Venugopal (2005) 273 ITR 307 as cited by counsel; that decision concerned assessment years before the Finance (No. 2) Act 2009 inserted the third proviso to s.10(10C) and the proviso to s.89, and to the extent it permitted both the exemption and the relief on the same amount it no longer states the law from AY 2010-11 onwards. The present judgment's own operative direction does not depend on that point. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Two date conflicts in the report. Para 9 says the tax deducted was remitted to the Department on 06.01.2026 while para 12 says the amount was 'already deducted and paid as early as 06.02.2026'. Para 7 says the company 'deducted tax under Section 191', which on the surrounding text must be a slip for s.192. On the amendment dates, para 28 says the third proviso to s.10(10C)(ii) was inserted by the Finance (No. 2) Act 2009 'with effect from 01.04.2009' while the proviso to s.89 inserted by the same amendment took effect 'from 01.04.2010'; the two provisos are a matched pair and the commencement generally given for both is 1 April 2010, that is AY 2010-11. The entry states the AY 2010-11 position and flags the conflict rather than resolving it. The judgment reproduces s.10(10C), s.89 and s.17(3) side by side in a two-column table at para 31 and the column breaks make the text run together in places; the provisos have been read across against the same provisos reproduced independently in R. Banumathy v. CIT (Madras HC, W.P(MD) No.10602 of 2011) and they match. The judgment has 37 numbered paragraphs. Para 32 states that "Form 10E has been prescribed under Rule 21A of the Income Tax Rules, 1962." That is a slip. Form No. 10E is headed "[See rule 21AA]" and is prescribed by Rule 21AA (furnishing of particulars for claiming relief under s.89(1)); Rule 21A prescribes the manner of computing the relief. Checked against Syed Jamaluddin Ali v. State Bank of India (Patna HC, indiankanoon /doc/119071081/), Nikita Rameshchandra v. ITO (ITAT Pune, /doc/166675154/) and Vaishali Baban Bhosale v. ITO (ITAT Pune, /doc/60803474/), each of which states that the form is furnished under rule 21AA. The judgment's Rule 21A references are reported here as the Court's words; the entry does not adopt them. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was disposed of without any direction against the employer. The Court held that the employer, although aware that the employees might be entitled to relief under s.89 read with s.17(3) and that the amounts might not form part of taxable income, could not be required to grant such relief voluntarily in the absence of an application in Form 10E as contemplated by Rule 21A, this being evident from s.192(2A); the employer therefore acted strictly in accordance with the mandate of the law (paras 34 and 35). Because the amounts might not be taxable in the employees' hands and tax had already been deducted and remitted, the Court directed the employees to file returns under s.139(1) within thirty days of receipt of the order and the second respondent to process them under s.143(1) and refund the appropriate amount within two months (para 36).
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