Section 10(10B)

Section 10(10B) — the law in short

What the courts have decided on section 10(10B), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Suresh Pal Chauhan v ITO ITATHelps taxpayer
  My client took the package when HMT's Tractor Division was closed. CPC allowed only Rs 5 lakh under s.10(10C) and then refused s.89 relief because of it. Is the whole package exempt?
  On these facts yes. Where the Central Government approves a scheme for extending special protection to workmen of an undertaking being closed down, the second proviso to s.10(10B) displaces the monetary ceiling and the whole of the compensation is exempt. The Chandigarh Bench held the HMT Tractor Division package fell under s.10(10B) and not s.10(10C), and separately directed that s.89 relief be allowed on the net gratuity.
• Statutory position — s.10(10B): retrenchment compensation, the lesser-of test against s.25F(b) of the Industrial Disputes Act, and the second proviso that removes the cap altogether for an approved scheme CBDT Circulars & InstructionsCuts both ways
  My client's factory closed and he was paid retrenchment compensation. How much is exempt, and is there any way to get the whole of it out of tax?
  Section 10(10B) exempts compensation received by a workman at the time of his retrenchment under the Industrial Disputes Act 1947 or under any other Act, rules, orders, notifications, standing orders, award, contract of service or otherwise, but the first proviso caps the exemption at the lower of two figures — the amount calculated under clause (b) of section 25F of the Industrial Disputes Act, and such amount, not being less than fifty thousand rupees, as the Central Government may specify by notification. There is one way to escape the cap entirely: the second proviso disapplies the first where the compensation is received in accordance with a scheme approved by the Central Government having regard to the need for extending special protection to the workmen in the undertaking to which the scheme applies.
• 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.