The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that termination of employment due to misconduct is not beyond the control of assesses and refused to allow an exemption under section 10 (38) to the employee-assessee.
Vineet Sethi, the assessee challenged the order of NFAC dated 10.1.2023 for the assessment year 2017-18. The assessee has received a provident fund of an amount of Rs.35,02,307/-, which has been reflected in Form No.26AS which shows the deduction of TDS of Rs.3,50,231/-.
The assessee offered an amount of Rs.15,96,983/- towards receipt of employer contribution and an amount of Rs.2,61,430/- towards receipt of interest in his return of income as “income from other sources”. The assessee has not offered the assessee’s contribution of Rs.16,43,894/- to income tax by claiming exemption under Section 10 (12) of the Income-tax Act, 1961.
The AO while processing the return u/s 143(1) of the Act brought to tax the amount of Rs.16,43,894/- for the reason that it is not exempted under Section 10(12) of the Income Tax Act. On appeal before CIT(A), it was observed that the assessee has not fulfilled the condition laid down in Rule 8 of Part-A of the Fourth Schedule. The CIT(A) confirmed the order and intimation issued under Section 143(1) of the Income Tax Act.
It was submitted that the assessee has worked in M/s. TBM Consultants Pvt. Ltd. from 1st October 2011 to 15th February 2016 covering 4 years 5 months and 15 days. The assessee’s employment has been terminated as the company has closed its business.
The assessee has furnished the data sheet of the Ministry of Corporate Affairs (MCA), wherein the assessee’s name has been struck off which shows that the company in last Annual General Meeting was held on 29.9.2018 for relating to the year ended on 31.3.2018, thereafter no AGM was held. Further, it was submitted that the assessee has been terminated from service due to reasons beyond his control, as such the assessee is entitled to exemption under Section 10(12) of the Income Tax Act.
It was found that the assessee has been terminated vide letter issued by TBM Consultants India Pvt. Ltd. due to misconduct of the assessee, wherein it was alleged that the assessee has been indulging in activities, which are prejudicial to the interest of the employer company and assessee was promoting and carrying out his business activities, which business activities competed with the employer company by using website namely www.vineetsethi.com.
A Coram comprising of Shri N V Vasudevan, Vice President and Shri Chandra Poojari, Accountant Member observed that the termination of the employee cannot be said that it is beyond the control of the assessee.
Further held that the exemption under Section 10(12) of the Income Tax Act is not available to the assessee and even the closure of business cannot be said that the business of the assessee has been closed in the assessment year under consideration. While dismissing the appeal of the assessee, the Tribunal upheld the order of the lower authorities.
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