Section 89(1)

Section 89(1) — the law in short

What the courts have decided on section 89(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Koodathil Kallyatan Ambujakshan High CourtHelps taxpayerSuperseded by amendment
  My employer's early retirement scheme does not spell out every condition in Rule 2BA. Does that destroy the s.10(10C) exemption?
  Not on these facts. The Bombay High Court upheld the exemption for employees who took the Reserve Bank of India's Optional Early Retirement Scheme, holding that the six requirements of Rule 2BA were satisfied expressly or by implication on the material on record, including evidence that the vacancies were not filled. That is what the decision is still good for. Its second holding — that relief under s.89 is available on the amount above Rs 5,00,000 in addition to the exemption — states the law only for assessment years up to 2009-10. From assessment year 2010-11 the proviso to s.89 and the third proviso to s.10(10C), inserted by the Finance (No. 2) Act, 2009 with effect from 1 April 2010, make the exemption and the relief alternatives, and claiming s.89 relief forfeits the Rs 5,00,000 exemption 'in relation to such, or any other, assessment year'. The Court also applied the Supreme Court's ruling in Hero Cycles that a Board circular binds the Assessing Officer but not the appellate authorities, the Tribunal or the Court.
• CIT v Nagesh Devidas Kulkarni High CourtHelps taxpayerSuperseded by amendment
  I took voluntary retirement. Can I claim both the s.10(10C) exemption and s.89 relief on the balance?
  Only for assessment years up to 2009-10. The Bombay High Court held that a voluntary retirement payment is compensation received in connection with the termination of employment and so is 'profits in lieu of salary' under s.17(3), and that relief under s.89 was therefore available on the amount taxed over and above the Rs 5,00,000 exempted by s.10(10C). That was the position for the year before the Court, assessment year 2002-03. From assessment year 2010-11 the two are alternatives by statute: the proviso to s.89 and the third proviso to s.10(10C), both inserted by the Finance (No. 2) Act, 2009 with effect from 1 April 2010, mean that claiming the s.10(10C) exemption bars s.89 relief on the same receipt, and that taking s.89 relief forfeits the exemption — not only for that year but 'in relation to such, or any other, assessment year'. What survives of this decision is its holding that a voluntary retirement payment is 'profits in lieu of salary' under s.17(3).
• CIT v G.V. Venugopal High CourtHelps taxpayerSuperseded by amendment
  I took VRS from a bank and claimed the Rs 5 lakh exemption under section 10(10C). Can I also claim spread-over relief under section 89(1) on the balance?
  Yes, for the years this judgment governs. The Madras High Court held that exemption under section 10(10C) up to Rs 5 lakh and relief under section 89(1) on the balance VRS compensation are two separate benefits, and nothing in the Act barred taking both. The second proviso to section 10(10C) only stops a second exemption under that clause in another assessment year; it says nothing about section 89(1). VRS compensation is a profit in lieu of salary under section 17(3), so section 89(1) applies to it. The Department's appeal was dismissed.
• Vaishali Baban Bhosale v ITO ITATHelps taxpayerValidity unconfirmed
  My s.89 relief on salary arrears was disallowed in the intimation because Form 10E was not filed with the return. Is it lost?
  Not necessarily. The Pune Tribunal restored the claim to the Assessing Officer with a direction to verify it and allow the relief, where the assessee had filed Form 10E only years after the intimation. The Bench followed coordinate bench decisions holding that a delay in filing the form should not by itself defeat a relief the assessee is otherwise entitled to.

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.