Relief u/s 89(1) available even if arrears received on Voluntary Retirement

Relief u/s 89(1) available even when arrears were received in addition to compensation for Voluntary Retirement – ITAT

In a recent judgment, ITAT Pune has held that relief u/s 89(1) is available even though the assessee received the arrear in addition to compensation for Voluntary Retirement by the company on account of closure of the plant.

ABCAUS Case Law Citation:
5140 (2026) (05) abacus.in ITAT

In the instant case, the assessee had challenged the Assessment order framed by National Faceless Appeal Centrepassed u/s.147 r.w.s.144B of the Income Tax Act, 1961 (‘the Act’) denying the benefit of relief under section 89(1) of the Act.

The appellant assessee was an individual and was employed with a Pvt. Ltd. company and his services were terminated on account of closure of the plant and the termination had been done under the Voluntary Retirement Scheme.

In the proceedings carried out u/s.147 r.w.s.144B of the Act, one of the issue was regarding the denial of relief u/s 89(1) of the Act. The CIT(A) confirmed the action of the Assessing Officer observing that relief u/s 89(1) is not applicable because the arrears were received towards Voluntary Retirement on termination of services and also Form 16 did not reflect any relief u/s 89(1) of the Act. 

Before the Tribunal, assessee referring to the decision of the Tribunal submitted that he deserved relief u/s 89(1) of the Act even though the assessee received the arrear in addition to compensation for Voluntary Retirement by the company on account of closure of the plant.

The Tribunal observed that in similar set of facts and circumstances, this issue had been dealt by the Tribunal and relying on the decision of the Hon’ble Jurisdictional High Court and the Hon’ble Karnataka High Court, the appeal was allowed and case was remitted to the Jurisdictional Assessing Officer for the limited purpose of verifying the calculation for the relief claimed u/s 89(1) of the Act.

In the light of the decision of the Tribunal and being squarely applicable on the facts of the instant case, the Tribunal held that even in case of Voluntary Retirement compensation on which the assessee is eligible to get exemption u/s.10(10C) of the Act, assessee in addition is also entitled to get relief u/s 89(1) of the Act for the arrears of salary received by him. 

The Tribunal noted that since the quantum of relief u/s 89(1) was not disputed and the assessee had e-filed Form 10E, the relief claimed by the assessee u/s 89(1) was allowed. 

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