The Income Tax Appellate Tribunal (ITAT) recently come up with an order and allowed income tax deduction on payment to Employees come under the voluntary Retirement Scheme (VRS).
This order has come in a case where a company Foseco India Limited is the appellant and it is in the business of manufacturing and sale of foundry fluxes, chemical, and pro fax. The company paid around 2.89 crores as under VRS to employees of its Calcutta branch and then filed the return claiming 
That has been rejected by the Assessing Officer (AO). The AO did not allow deduction of Rs.2,86,86,055/- by treating the same as a capital expenditure. The first appeal was also dismissed by the Commissioner of Income Tax 
The Tribunal said that “It is noticed that similar issue came up for consideration before the Tribunal in assessee’s own case for the immediately succeeding assessment year. Vide order dated 26-03- 2010 (ITA No.4667/M/2005), the Tribunal has decided it in favor of the assessees. The Revenue carried the matter before the Hon’ble Bombay High Court against the said order of the Tribunal. Vide judgement dated 08-03-2013, the Hon’ble Bombay High Court dismissed the appeal of the Revenue.”
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The tribunal further added “It is seen that section 35DDA has been inserted by the Finance Act, 2001 providing for amortization of expenditure incurred on Voluntary Retirement Scheme. The assessment year under consideration is prior to the insertion of section 35DDA and hence cannot rule the position. The instant year would be governed by the earlier provisions,”.
