ORDER
P.S. Kalsian, A.M.
1. All these appeals have been filed by the Revenue against the different orders of CIT(A). All these appeals are disposed of by common order as in all the appeals identical question of law and facts is involved. In all the appeals, the Revenue has raised the following ground of appeal :
“On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing to allow claim of relief under Section 89(1) on the amount received by the assessee under the voluntary retirement scheme as reduced by exemption under Section 10(10C) of the IT Act.”
2. The appeal of Shri Chandra Kant S. Dharma in ITA No. 652/Ind/2004 for asst. yr. 2001-02 is considered first. All the assessees including Shri Chandra Kant S. Dharma were employees in the bank. Shri Chandra Kant S. Dharma filed return of income declaring income of Rs. 4,36,280 on 31st Aug., 2001. Main source of income of the assessee is salary. The return of income was first processed under Section 143(1) of the IT Act. Subsequently, the AO observed that the assessee sought voluntary retirement from the bank and assessee was paid ex gratia amount of Rs. 8,04,904 at the time of retirement. The assessee claimed relief under Section 89(1) in respect of ex gratia payment by filing Form No. 10E which is relevant for claiming relief under Section 89(1) r/w Rule 21A of the IT Rules. The AO considered that Annex. 3 of the Form 10E in which spread over of ex gratia payment is claimed for three years is applicable for receipts pertaining to compensation which is covered under Rule 21A(l)(a). The AO came to the conclusion that the assessee’s claim of deduction under Section 89(1) in the return of income was not correct and there was escapement of income within the meaning of Section 147/148 of the IT Act. The AO, therefore, issued notice under Section 148 requiring the assessee to file the return of income under Section 148 of the IT Act.
3. In response to notice under Section 143(2), it was claimed by the assessee’s counsel before the AO that assessee is entitled to relief under Section 89(1) of the IT Act on the balance amount after allowing deduction on Rs. 5,00,000 out of the total ex gratia payment received by the assessee in view of the decisions of the Madras High Court in case of CIT v. M. Raman (2000) 245 ITR 856 (Mad) and CIT v. J. Visalakshi (1994) 206 ITR 531 (Mad). The AO considered that decisions of Madras High Court are applicable in a case where compensation has been paid to the retiring employee but in the case of the assessee ex gratia payment has been made which cannot be equated with the compensation. According to the AO, ex gratia payment is made by the employer and compensation is a matter of right of the employee whereas ex gratia payment is in the discretion of the employer. The AO, therefore, denied relief under Section 89(1) of the IT Act.
4. The order of the AO was challenged before the CIT(A) and in first appeal it was argued before the CIT(A) that amount received under voluntary retirement scheme constitutes compensation for termination of service and thus was profit in lieu of salary for the purpose of Section 17(3) of the IT Act and the assessee is entitled to relief under Section 89(1) on the amount as reduced by the exemption under Section 10(10C), and second proviso to Section 10(10C) has no relevance for the purpose of relief under Section 89(1). The CIT(A) in para 4 held as under :
“I have carefully gone through the facts and submissions. I have also perused the decisions cited. I find that there is enough force in the argument of the appellant that he is entitled for relief under Section 89(1). Sec. 10(10C) speaks about the total exemption from income-tax of the compensation received upto Rs. 5 lakhs. The balance of amount, if any, over and above the exemption limit of Rs. 5 lakhs is taxable in the hands of the appellant as profit in lieu of salary under Section 17(3). Since, this amount is to be taxed under the head “Salary”, the same is also entitled for all reliefs/deductions available for compensation of income under that head. There is nothing either in Section 10(10C) or in Section 89(1) that makes them mutually exclusive. They are two independent sections and none of them are worded in such a fashion as to deprive the benefit of the other section. The provisions contained in Section 10(10C) and Section 89(1) of the IT Act are quite independent from each other and there is no overlapping in this regard. In view of the foregoing discussion, the AO is directed to allow the claim of the appellant for relief under Section 89(1) on the amount received under the voluntary retirement scheme as reduced by exemption under Section 10(10C).”
5. The Department felt aggrieved and carried the matter before the Tribunal. The Department has raised only one ground of appeal as mentioned in the preceding para.
6. It is argued by the learned Departmental Representative that the assessee cannot claim exemption under Section 10(10C) of the IT Act as well as deduction under Section 89(1) of the IT Act. The deduction under these two sections cannot be enjoyed simultaneously. According to learned Departmental Representative, exemption under Section 10(10C) will be admissible only when compensation is less than Rs. 5 lakhs. If the compensation is more than Rs. 5 lakhs then exemption under Section 10(10C) will not be admissible and only relief under Section 89 will be admissible. According to learned Departmental Representative, the words “to the extent” in Section 10(10C) mean that if the compensation does not exceed Rs. 5 lakhs then only exemption under Section 10(10C) will be admissible. Sec. 10(10C) is not applicable if the compensation exceeds Rs. 5 lakhs. This issue, however. was not raised by the AO and has not been considered by the CIT(A) but learned Departmental Representative argued that it is a question of law and can be considered by the Tribunal even if the CIT(A) has not considered the issue.
7. The learned counsel of the assessee pointed out that as per Board’s Instruction No. 1979, dt. 27th March, 2000, the tax effect in the case of the assessee is less than Rs. 1,00,000 and Department is not supposed to file appeal against the order of the CIT(A). The learned counsel of the assessee also referred to the decision of Hon’ble Madhya Pradesh High Court in the case of Asstt. CIT v. Aradhana Oil Mill 30 FTC 446 (MP). The learned counsel also argued that the ex gratia payment received by the assessee at the time of voluntary retirement is in the nature of compensation and under sub-r. (4) of Rule 21A, the relief under Section 89(1) is also admissible. The learned counsel of the assessee also referred to the decision of Hon’ble Bombay High Court in case of CIT v. Smt Godavaridevi Saraf (1978) 113 ITR 589 (Bom) and argued that decision of the Madras High Court is binding on the Tribunal even if it is not the decision of jurisdictional High Court. The learned counsel argued that decision of the Madras High Court is binding on the Tribunal. The learned counsel relied on the following decisions :
(i) (1994) 206 ITR 531 (Mad) (supra);
(ii) G.N. Badami v. CIT (1999) 240 ITR 263 (Mad);
(iii) P. Amnachalam v. CIT (2000) 241 ITR 327 (Mad); and
(iv) (2000) 245 ITR 856 (Mad) (supra).
8. The learned Departmental Representative, in reply, stated that decision of any other High Court other then the Hon’ble Madhya Pradesh High Court is advisory in nature and not binding on the Tribunal. The learned Departmental Representative also pointed out that Department can make exception in filing of appeal against the order of the CIT(A).
9. I have carefully considered the facts of the case, rival submissions and material on record. Under Instruction No. 1979, dt. 27th March, 2000, the CBDT has fixed monetary limit for filing appeal before various appellate authorities. Under Instruction No. 1979, the Revenue is prohibited from filing appeal before the Tribunal if tax effect does not exceed the monetary limit of Rs. 1,00,000. Under this instruction, appeal can be filed where tax effect in income-tax matter exceeds Rs. 1,00,000. The Board has subsequently clarified certain issues arising out of Instruction No. 1979 by Instruction No. 1985, dt. 29th June, 2000. Under this instruction, the monetary limit in the context of “each case taken singly” would mean each assessment year for each assessee considered at one point of time. The clarification issued by the Board reads as under :
“1. The monetary limits in the context of ‘each case taken singly’ would mean each assessment year for each assessee considered at one point of time. For example, if filing of appeals were to be considered in the case of XYZ Limited for asst. yrs. 1995-96 and 1996-97, the monetary limit as prescribed in Instruction No. 1979 would apply taking together the asst, yrs. 1995-96 and 1996-97.
2. Even if the issues involved in an appeal under consideration are already pending in appeal before the appellate authorities, all subsequent appeals will now be filed for particular assessment year only as indicated in (i) above, if the tax effect exceeds the prescribed monetary limit.”
10. It is clear from the Board’s Instruction No. 1985 that each case of the assessee has to be considered independently on similar issue and cases of all the assessees cannot be combined for the purpose of determining tax effect. Therefore, only the case of assessee has to be considered for the purpose of determining tax effect and cases of all the assessees even on similar issues cannot be considered for the purpose of determining tax effect to decide whether the Revenue can file appeal in the case of an assessee under Instruction No. 1979 r/w Instruction No. 1985. The tax effect in the case of the assessee does not exceed Rs. 1,00,000 and, therefore, Revenue is prohibited from filing the appeal before the Tribunal in the case of the assessee in view of the Instruction Nos. 1979 and 1985. On this ground alone, the appeal of the Revenue has to be dismissed because the tax effect is less than Rs 1,00,000 and Revenue is prohibited from filing the appeal before the Tribunal.
11. Despite the fact that Revenue’s appeal is liable to be dismissed in view of instructions of the Board, the issue raised by the Revenue is also considered on merit. The assessee was a bank employee. The bank framed a scheme for voluntary retirement in accordance with the guidelines issued by the Central Government. There is no dispute about the fact that the various banks have framed voluntary retirement scheme in accordance with the guidelines issued by the Central Government. The various assessees before the Tribunal including Shri Chandra Kant S. Dharma have opted for voluntary retirement scheme. The assessee has received the amount of Rs. 8,04,904 on account of voluntary retirement. This amount of Rs. 8,04,904 has been termed as ex gratia payment by the bank. The assessee claimed exemption of Rs. 5,00,000 under Section 10(10C) of the IT Act and on the balance amount of Rs. 3,04,904 (Rs. 8,04,904 -Rs. 5,00,000), relief under Section 89(1) was claimed by the assessee. There is no dispute about the working of relief. The only dispute is that the assessee is not entitled for the relief under Section 89(1).
12. In order to consider the issue raised by the Revenue, it is considered necessary to refer to certain decisions of Hon’ble Madras High Court and decision of Tribunal.
13. In the case of CIT v. J. Visalakshi (supra), the Hon’ble Madras High Court considered the nature of ex gratia payment of Rs. 63,230 received by the assessee consequent to his resignation from employment and whether the assessee is entitled to relief under Section 89(1) of the IT Act. The Hon’ble Madras High Court considered the provisions of Section 89(1) of the IT Act and Section 17(3)(i) and (ii) of the IT Act and after considering these two provisions, the Hon’ble Madras High Court held as under :
“The other portions of Section 89 are not relevant for our purpose. The question as to whether the assessee is entitled to the relief under Section 89(1) would depend upon the interpretation to be placed on the words ‘termination of his employment’ occurring in Sub-section (3)(i) of Section 17 of the Act. It is necessary to bear in mind that termination of service can take place either by resignation or by dismissal or by compulsory retirement or on attaining superannuation. That being so, we are of the view that there is no justification to confine the meaning of the word ‘termination’ only to the case of either voluntary retirement or superannuation, as per the stand taken by the Department. It must be borne in mind that Section 89(1) r/w Section 17(3) of the Act are beneficially intended to grant certain benefits to employees or persons in service. Therefore, while placing interpretation on such clauses, the object with which such clauses are provided in the Act must be borne in mind, the object being to grant certain benefits to the person whose service is terminated. Therefore, if the meaning of the word ‘termination’ is confined to cases of voluntary retirement or superannuation only, the object of the clauses will not be fully achieved and it would amount to restricting the scope of the beneficial clause. Hence, we are of the view that the Tribunal is justified in holding that the ex gratia compensation of Rs. 63,230, received by the assessee consequent on his resignation, is entitled to the relief under Section 89(1) of the Act.”
In this case, Hon’ble Madras High Court, therefore, held that Section 89(1) r/w Section 17(3) of the IT Act are beneficial clauses intended to grant certain benefits to employees in service. The Hon’ble High Court, therefore, held that the ex gratia compensation of Rs. 63,230 received by the assessee consequent on his resignation is entitled to the relief under Section 89(1) of the IT Act. The decision in the case of CIT v. J, Visalakshi (supra) was followed by the Madras High Court in the case of CIT v. M. Raman (supra) and certain other cases. In the case of ITO v. Dilip Sirodkar, the Panaji Bench of Tribunal in ITA No. 73/Png/2003 vide order dt. 27th Jan., 2004, (2004) 82 TTJ (Panaji) 869, also held that the amount received under voluntary retirement constitutes compensation for termination of service for the purpose of Section 17(3) of the IT Act. As a result of assessee having received the amount which is being taxed as profit in lieu of salary, the income is assessed at a rate higher than the rate it would otherwise have been assessed. Therefore, the conditions laid down in Section 89(1) are satisfied and it was held by the Panaji Bench of the Tribunal that the assessee is entitled to relief under Section 89(1) on the amount received under voluntary retirement as reduced by the exemption under Section 10(10C) of the IT Act. It was also held that implication of second proviso to Section 10(10C) is only that in case the assessee is allowed exemption under Section 10(10C) in one assessment year, such assessee is not entitled to exemption under Section 10(10C) in any other assessment year. This proviso is not relevant for the purpose of considering relief under Section 89(1) of the IT Act.
14. After considering the abovementioned decision, I am of the opinion that the assessee is entitled to exemption of Rs. 5,00,000 under Section 10(10C) of the IT Act and also entitled to relief under Section 89(1) of the IT Act. The provisions of Section 89(1) are reproduced below for the sake of convenience :
“Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, of salary for more than twelve months or a payment which under the provisions of Clause (3) of Section 17 is a profit in lieu of salary, or is in receipt of a sum in the nature of family pension as defined in the Explanation to Clause (iia) of Section 57, being paid in arrears, due to which his total income is assessed at a rate higher than that at which it. would otherwise have been assessed, the AO shall, on an application made to him in this behalf, grant such relief as may be prescribed.”
15. There is no dispute about the fact that ex gratia payment received by the assessee at the time of retirement is in the nature of profit in lieu of salary. There is no dispute about the fact that the assessee is also entitled to exemption under Section 10(10C) of the IT Act in respect of ex gratia payment received by the assessee or receivable by the assessee on account of voluntary retirement under the scheme framed by the bank. The only dispute raised by the Revenue is that the assessee has been paid ex gratia payment at the time of retirement which cannot be equated with the compensation. According to the AO, ex gratia payment is in the discretion of the employer, whereas compensation is a matter of right of the employee. Such an. argument of the AO is not valid. Though the amount received by the assessee at the time of retirement is termed as ex gratia payment but nomenclature is not decisive to determine the nature of payment. The assessee has voluntarily retired under the voluntary retirement scheme framed by the bank in accordance with the guidelines issued by the Central Government. Therefore, under voluntary retirement scheme, the assessee is entitled to receive payment from the bank as a matter of right whether such a payment is called ex gratia payment or compensation is of no consequence because the use of words “ex gratia payment” by the bank for the purpose of determining the amount payable to the assessee (employee of the bank) do not mean that it was not a compensation paid by the bank due to the option of the assessee to seek voluntary retirement under the voluntary retirement scheme. As soon as an employee of the bank opted for voluntary retirement scheme, he is entitled to receive the amount in accordance with the scheme framed by the bank and, therefore, the amount termed as ex gratia payment by the bank has been received by the employee as a matter of right and it is compensation in nature though the bank has termed it as ex gratia payment.
16. The assessee is entitled to exemption under Section 10(10C) to the extent of Rs. 5,00,000. Words used in Section 10(10C) “to the extent such amount does not exceed Rs. 5,00,000” indicate that the assessee receiving payment under voluntary retirement scheme is entitled to exemption upto Rs. 5,00,000. There is no indication in Section 10(10C) that if an assessee received the amount exceeding Rs. 5,00,000 at the time of voluntary retirement, then he is not entitled to exemption under Section 10(100 of the IT Act. Therefore, the argument of the learned Departmental Representative that assessee is entitled to exemption under Section 10(10C) only if the ex gratia payment or compensation received by the assessee does not exceed Rs. 5,00,000, is without merit.
17. Now, the question is whether the assessee is entitled to relief under Section 89(1) of the IT Act on the balance amount after allowing exemption of Rs. 5,00,000 under Section 10(10C). For instance, in the case of Shri Chandra Kant S. Dharma, after allowing deduction of Rs. 5,00,000 out of the total amount of Rs. 8,04,904, whether the assessee is entitled exemption for balance amount of Rs. 3,04,904. According to learned Departmental Representative, the exemption under Section 10(10C) and relief under Section 89(1) cannot be allowed simultaneously, but there is no such provision in the Act which restricts the assessee’s claim of relief under Section 89(1) on the balance amount after allowing exemption under Section 10(10C) of the IT Act. In the case of CIT v. J. Visalakshi (supra), it was held by Hon’ble Madras High Court that the object of Section 89(1) is to grant certain benefits to the person whose services are terminated. The provisions of Section 10(10C) and Section 89(1) are independent and if exemption under Section 10(10C) is admissible upto Rs. 5,00,000, then an assessee is also entitled to relief under Section 89(1) on the balance amount because the assessee has received salary for more than 12 months at the time of retirement. The amount of ex gratia payment is a profit in lieu of salary under Section 17(3) of the IT Act and, therefore, forms part of the salary of the employee and income of the assessee is assessed at a rate higher than that at which it would otherwise have been assessed. Therefore, the conditions laid down under Section 89(1) are satisfied and the assessee is entitled to relief under Section 89(1) in accordance with the provisions of that section. There is no dispute about calculation of relief under Section 89(1) also. Therefore, there is no merit in the issue raised by the Revenue and the appeal of the Revenue is dismissed.
18. In all other appeals filed by the Revenue, mentioned above, the tax effect is less than Rs. 1,00,000 and, therefore, in view of the Instruction No. 1979 r/w Instruction No. 1985 mentioned in the preceding paras, the Revenue is prohibited from filing the appeal before the Tribunal and on this ground all the appeals of the Revenue are dismissed. Even on merit, in view of the reasons given in preceding paras, all the appeals of the Revenue are dismissed as all the assessees are entitled to exemption under Section 10(10C) of the IT Act as well as relief under Section 89(1) of the IT Act.
19. In the result, all the appeals filed by the Revenue are dismissed.