Exemption — Amount received by employees of Reserve Bank of India opting for Optional Early Retirement scheme was eligible for exemption u/s.10(10C).

[Chandra Ranganathan and Others v. CIT, (2010) 326 ITR
49 (SC)]

The appeals before the Supreme Court were directed against
the order passed by the High Court in several tax appeal cases where the
question involved was with regards to the deduction available to the appellants
u/s.10(10C) of the Income-tax Act, 1961. The order of the Commissioner of
Income-tax (Appeals)-IV, Chennai, relating to the A.Y. 2004-05, was questioned
before the Income-tax Appellate Tribunal, Chennai Bench, which were
disposed of by the Tribunal upholding the claim for deduction made by the
appellants. The same was the subject-matter of the tax appeal cases before the
High Court, which referred to the order of the Appellate Tribunal on the basis
of letter F. No. 225/74/2005-ITA-II, dated October 20, 2005, of the Central
Board of Direct Taxes so far as the Reserve Bank of India was concerned. The
High Court held that having regard to the above letter of the Central Board of
Direct Taxes, the amount received by the employees of the RBI opting for
Optional Early Retirement Scheme did not qualify for deduction u/s.10(10C) of
the aforesaid Act.

During the course of hearing of the appeals, it was brought
to the notice of the Supreme Court that by the subsequent letter dated May 8,
2009, issued by the Central Board of Direct Taxes, it was indicated that the
matter had been reviewed on the basis of the judgment of the Bombay High Court
dated July 4, 2008, in the case of CIT v. Koodathil Kallyatan Ambujakshan,
(2009) 309 ITR 113 (Bom.); and it was held that amount received by the retiring
employees of the RBI would be eligible for exemption under the aforesaid
provisions of the Income-tax Act. On behalf of the Union of India and the
Commissioner of Income-tax, the respondent herein, it was submitted that in view
of the said Circular, the respondent would allow the benefit of deduction to the
appellants u/s.10(10C) of the Income-tax Act, 1961, as far as the retired
employees of the Reserve Bank of India were concerned.

Having regard to the above, the Supreme Court held that the
appeals had succeeded and were allowed. The impugned order passed by the High
Court was set aside and that of the Tribunal was restored.