What the courts have decided on section 10(10A), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Arun Dhir v DCIT — s.10(10A) contains no requirement that the commutation be received on superannuation, and the denial of a plainly available exemption is a mistake apparent from the record under s.154
ITATHelps taxpayerNo later treatment found
My client took a lump sum from his employer's pension policy in lieu of his pensionary rights and joined another group. The Assessing Officer says s.10(10A) only applies on superannuation and that in any event the client never appealed the assessment, so a s.154 application is not open to him. Is there anything I can do?
On this Tribunal's view, yes on both counts. The ITAT Chandigarh held that section 10(10A) nowhere provides that the benefit accrues only on superannuation or retirement, so a lump sum received in lieu of pensionary benefit under a scheme formulated by the employer falls within s.10(10A)(ii); and it held that the refusal of a benefit admissible in law was a mistake apparent from the record which the Assessing Officer ought to have rectified under section 154, following coordinate-bench orders in the cases of other retirees of the same employer.
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Statutory position — s.10(10A): commuted pension, why a corporation established by an Act is on the government side of the line, and the one-third / one-half rule that turns on gratuity
CBDT Circulars & InstructionsCuts both ways
My client has commuted part of his pension from a private employer's scheme and received a lump sum. How much of it is exempt, and does it make any difference that he also drew gratuity?
It makes all the difference. Under s.10(10A)(ii) a payment in commutation of pension received under any scheme of any other employer is exempt only to the extent of the commuted value of one-third of the pension he is normally entitled to receive where he receives any gratuity, and the commuted value of one-half of such pension in any other case. Under s.10(10A)(i) the commuted pension is exempt without any limit at all for the classes listed there — which include not only Central and State Government servants and the all-India and defence services but also employees of a local authority and of a corporation established by a Central, State or Provincial Act — and under s.10(10A)(iii) any payment in commutation of pension received from a fund under clause (23AAB) is exempt without limit.
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Statutory position — s.17(3): what "profits in lieu of salary" includes, the exemption receipts it carves out, and the limb that catches money paid before employment begins or after it ends
CBDT Circulars & InstructionsCuts both ways
My client received a payment from a former employer that is not gratuity, not retrenchment compensation and not under any VRS. The Assessing Officer says it is profits in lieu of salary. What exactly does s.17(3) cover, and what does it not?
Section 17(3) has three limbs. Clause (i) covers the amount of any compensation due to or received from an employer or former employer at or in connection with the termination of employment or the modification of its terms and conditions. Clause (ii) covers any payment due to or received from an employer, a former employer or a provident or other fund, but expressly excludes any payment referred to in clause (10), (10A), (10B), (11), (12), (13) or (13A) of section 10, and excludes so much of the payment as consists of the employee's own contributions or interest on them or any sum received under a Keyman insurance policy including bonus allocated on it. Clause (iii) covers any amount due to or received, whether in lump sum or otherwise, by any assessee from any person before his joining any employment with that person or after cessation of his employment with that person.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
