My client missed the s.10(10C) exemption in the original return, filed a revised return that the officer lodged as invalid, and the Commissioner rejected the s.264 revision. Is there anything left?
Yes. The Madras High Court set aside the s.264 order and directed refund of the excess tax, holding that the exemption under s.10(10C) up to five lakh rupees was available to the employee of a bank under an early retirement option scheme and that Rule 2BA cannot cut down the section. It added that where an assessee pays excess tax it is the Department's bounden duty to tell him of the reliefs he is entitled to and to refund the excess.
Decided by the High Court (M. Govindaraj J (Madurai Bench of the Madras High Court)) on 2018-06-05, reported as W.P(MD) No.10602 of 2011 (Madras High Court, Madurai Bench). It bears on section 10(10C), section Rule 2BA, section 264, section 139(1), section 139(4), section 139(5), section 143(1), section 119 of the Income Tax Act 1961, in Salary & Perquisites, Capital Gains Exemptions, Revision & Rectification and Refunds, Interest & Condonation matters.
The value here is procedural as much as substantive. It is authority that a s.264 revision is a live route where a genuine exemption was missed and the revised return was lodged as invalid, and that Circular No. 14 (XL-35) of 1955 obliges the officer to guide the assessee on claims and reliefs rather than take advantage of the omission. On the substance it belongs to the settled line that a voluntary retirement or early retirement scheme is not to be denied s.10(10C) merely because the scheme does not expressly recite every requirement of Rule 2BA. What it does NOT decide, and what must not be read into it, is the interaction with s.89: this was assessment year 2004-05, and the third proviso to s.10(10C) — which forfeits the exemption where relief under s.89 has been allowed on the same amount — was inserted only by the Finance (No. 2) Act 2009 with effect from AY 2010-11. For any year from AY 2010-11 the exemption and the relief are alternatives and this judgment cannot be used to claim both.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioner was an employee of ICICI Bank who opted for an Early Retirement Optional Scheme. For AY 2004-05 the original return filed on 3 December 2004 admitted total income of Rs 10,19,201 and was processed under s.143(1) on 21 February 2005. A revised return filed on 1 July 2005 admitted Rs 5,19,207 after claiming exemption of Rs 5,00,000 under s.10(10C). The Assessing Officer lodged the revised return on 31 May 2007 on the footing that it did not comply with s.139(1) and had been filed after completion of the s.143(1) assessment. A letter dated 12 July 2007 asking that it be treated as filed under s.139(4) rather than s.139(5) was not considered. A revision under s.264 was rejected by the Commissioner by order dated 18 February 2011, which was challenged in this writ petition. The demand in issue was Rs 1,78,953 for AY 2004-05. The Department's stand was that the ICICI Bank scheme did not conform to Rule 2BA.
The writ petition was allowed. The Commissioner's order dated 18 February 2011 was set aside and the respondents were directed to refund the excess amount to which the petitioner is entitled under s.10(10C) (paras 12 and 13).
The Court set out s.10(10C) and Rule 2BA in full (paras 3 and 4) and recorded that the individual is entitled to exemption up to Rs 5,00,000 (para 10). It relied on CIT v. Koodathil Kallyatan Ambujakshan (2008) 219 CTR (Bom) 80, where the Bombay High Court held that the mere absence of an express recital that posts will not be filled cannot take a scheme outside s.10(10C) read with Rule 2BA, the rules being procedural and to be read in harmonious construction with the substantive provision, and on Chandra Ranganathan v. CIT (Civil Appeal Nos. 6997-7002 of 2009, decided 21 October 2009), where the Supreme Court held retiring employees of the RBI eligible for the exemption and set aside a contrary Madras High Court order (paras 7, 8 and 11). It held that Rule 2BA cannot exceed the provisions of the Act, that s.10(10C) and Rule 2BA do not apply to RBI alone, and that the benefit is equally available to employees of public sector and other companies including the petitioner (paras 10 and 12). It further held, relying on Circular No. 14 (XL-35) of 1955, that where an assessee files a return and pays excess tax it is incumbent on the officers of the Department to inform him of the reliefs he is entitled to, and that a Department with power to demand tax where there is a deficit has an equal duty to refund an excess (para 12). It also noted the Commissioner had condoned the delay in filing the revised return.
When the Income Tax Department has the power to demand payment of tax, where there is a deficit, it is equally a bounden duty to refund the payment of excess tax also.
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Handle my notice → Ask a CA on WhatsAppYes. The Madras High Court set aside the s.264 order and directed refund of the excess tax, holding that the exemption under s.10(10C) up to five lakh rupees was available to the employee of a bank under an early retirement option scheme and that Rule 2BA cannot cut down the section. It added that where an assessee pays excess tax it is the Department's bounden duty to tell him of the reliefs he is entitled to and to refund the excess. This was decided by the High Court (M. Govindaraj J (Madurai Bench of the Madras High Court)) and bears on section 10(10C), section Rule 2BA, section 264, section 139(1), section 139(4), section 139(5), section 143(1), section 119 of the Income Tax Act 1961. It is reported as W.P(MD) No.10602 of 2011 (Madras High Court, Madurai Bench). The value here is procedural as much as substantive. It is authority that a s.264 revision is a live route where a genuine exemption was missed and the revised return was lodged as invalid, and that Circular No. 14 (XL-35) of 1955 obliges the officer to guide the assessee on claims and reliefs rather than take advantage of the omission. On the substance it belongs to the settled line that a voluntary retirement or early retirement scheme is not to be denied s.10(10C) merely because the scheme does not expressly recite every requirement of Rule 2BA. What it does NOT decide, and what must not be read into it, is the interaction with s.89: this was assessment year 2004-05, and the third proviso to s.10(10C) — which forfeits the exemption where relief under s.89 has been allowed on the same amount — was inserted only by the Finance (No. 2) Act 2009 with effect from AY 2010-11. For any year from AY 2010-11 the exemption and the relief are alternatives and this judgment cannot be used to claim both. If it applies to you, the first step is this: Where a claim was omitted and the revised return has been lodged as invalid, move under s.264 rather than abandoning the year; the revisional authority can condone the delay and the writ court will review a refusal.
The petitioner was an employee of ICICI Bank who opted for an Early Retirement Optional Scheme. For AY 2004-05 the original return filed on 3 December 2004 admitted total income of Rs 10,19,201 and was processed under s.143(1) on 21 February 2005. A revised return filed on 1 July 2005 admitted Rs 5,19,207 after claiming exemption of Rs 5,00,000 under s.10(10C). The Assessing Officer lodged the revised return on 31 May 2007 on the footing that it did not comply with s.139(1) and had been filed after completion of the s.143(1) assessment. A letter dated 12 July 2007 asking that it be treated as filed under s.139(4) rather than s.139(5) was not considered. A revision under s.264 was rejected by the Commissioner by order dated 18 February 2011, which was challenged in this writ petition. The demand in issue was Rs 1,78,953 for AY 2004-05. The Department's stand was that the ICICI Bank scheme did not conform to Rule 2BA. The matter was decided on 2018-06-05 by the High Court (M. Govindaraj J (Madurai Bench of the Madras High Court)). On those facts the High Court held as follows. The writ petition was allowed. The Commissioner's order dated 18 February 2011 was set aside and the respondents were directed to refund the excess amount to which the petitioner is entitled under s.10(10C) (paras 12 and 13).
The Court set out s.10(10C) and Rule 2BA in full (paras 3 and 4) and recorded that the individual is entitled to exemption up to Rs 5,00,000 (para 10). It relied on CIT v. Koodathil Kallyatan Ambujakshan (2008) 219 CTR (Bom) 80, where the Bombay High Court held that the mere absence of an express recital that posts will not be filled cannot take a scheme outside s.10(10C) read with Rule 2BA, the rules being procedural and to be read in harmonious construction with the substantive provision, and on Chandra Ranganathan v. CIT (Civil Appeal Nos. 6997-7002 of 2009, decided 21 October 2009), where the Supreme Court held retiring employees of the RBI eligible for the exemption and set aside a contrary Madras High Court order (paras 7, 8 and 11). It held that Rule 2BA cannot exceed the provisions of the Act, that s.10(10C) and Rule 2BA do not apply to RBI alone, and that the benefit is equally available to employees of public sector and other companies including the petitioner (paras 10 and 12). It further held, relying on Circular No. 14 (XL-35) of 1955, that where an assessee files a return and pays excess tax it is incumbent on the officers of the Department to inform him of the reliefs he is entitled to, and that a Department with power to demand tax where there is a deficit has an equal duty to refund an excess (para 12). It also noted the Commissioner had condoned the delay in filing the revised return. In the words reproduced by the source cited on this page: "When the Income Tax Department has the power to demand payment of tax, where there is a deficit, it is equally a bounden duty to refund the payment of excess tax also." The decision followed or applied CIT v. Koodathil Kallyatan Ambujakshan (2008) 219 CTR (Bom) 80 — followed; Chandra Ranganathan v. CIT, Civil Appeal Nos. 6997-7002 of 2009, decided 21.10.2009 (SC) — followed; S. Parthasarathy v. ACIT, Tax Case (Appeal) Nos.1210, 1217, 1249 and 1250 of 2009, decided 23.12.2009 (Mad) — followed.
It was decided by the High Court on 2018-06-05 and is reported as W.P(MD) No.10602 of 2011 (Madras High Court, Madurai Bench). 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 10(10C), section Rule 2BA, section 264, section 139(1), section 139(4), section 139(5), section 143(1), section 119, 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 helps the taxpayer. The writ petition was allowed. The Commissioner's order dated 18 February 2011 was set aside and the respondents were directed to refund the excess amount to which the petitioner is entitled under s.10(10C) (paras 12 and 13). It arises in Salary & Perquisites, Capital Gains Exemptions, Revision & Rectification and Refunds, Interest & Condonation matters, on section 10(10C), section Rule 2BA, section 264, section 139(1), section 139(4), section 139(5), section 143(1), section 119 of the Income Tax Act 1961, and was decided by M. Govindaraj J (Madurai Bench of the Madras High Court). 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. Plead Circular No. 14 (XL-35) of 1955 on the officer's duty to guide the assessee to the reliefs he is entitled to, alongside the substantive claim. Do not accept a refusal grounded only on the scheme's failure to recite a Rule 2BA condition; the rule is procedural and cannot exceed the section. For any year from AY 2010-11, decide before filing whether the s.10(10C) exemption or s.89 relief is being claimed on the voluntary retirement amount — the third proviso to s.10(10C) forfeits the exemption if s.89 relief has been allowed on it for that or any other assessment year, and this judgment predates that proviso. Check the five lakh rupee ceiling in s.10(10C) and the second proviso, which bars a second exemption in any other assessment year once one has been allowed.
Validity check could not be completed. Validity check could not be completed; no later-treatment search was run on this judgment. The substantive holding on Rule 2BA rests on Koodathil Kallyatan Ambujakshan and on the Supreme Court's order in Chandra Ranganathan and is not in doubt. What has changed since the assessment year in issue is the interaction with s.89: the third proviso to s.10(10C) and the proviso to s.89, both inserted by the Finance (No. 2) Act 2009, make the exemption and the relief alternatives from AY 2010-11. This judgment is about AY 2004-05 and says nothing about that bar; it must not be read as authority for claiming both. 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.
The judgment refers to the petitioner as 'he' at the start of para 2 ('he is an employee of ICICI Bank') and thereafter throughout as 'she'; the cause title is R. Banumathy. Para 4 says 'Clause (viii) of Section 10(10C) specified a limit of Rs.5,00,000' — the five lakh limit is in the substantive part of clause (10C) and not in sub-clause (viii). Para 14 refers to the Circular as being 'Circular No.14(XL35) of 1955, dated 11.04.1955'. The full text of s.10(10C) as reproduced at para 3 includes the third proviso inserted in 2009, even though the assessment year in issue is 2004-05; the reproduction is of the section as it stood when the judgment was written and not as it applied to the year. That is the one place a careless reader could go badly wrong, and it is why this entry states the AY 2010-11 cut-off expressly. The judgment has 13 numbered paragraphs. 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 allowed. The Commissioner's order dated 18 February 2011 was set aside and the respondents were directed to refund the excess amount to which the petitioner is entitled under s.10(10C) (paras 12 and 13).
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