The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that a ₹65.21 lakh payout received by a former Pfizer Healthcare India employee under a voluntary retirement scheme is not taxable. According to reports from Mint, the tribunal held that the payment received under Pfizer's voluntary retirement scheme was a capital receipt and not chargeable to tax. The ruling was delivered in Prakash Sukhdeo Sonawane vs Income Tax Officer, Ward-1(1), Aurangabad, ITA No. 2180/PUN/2025 for assessment year 2019-20.
The taxpayer, who was an employee of Pfizer Healthcare India Pvt. Ltd. at its Aurangabad plant, received the ₹65,21,105 aggregate amount during FY 2018-19. As reported by Mint, the payment comprised ₹50,70,250.01 as ex-gratia/severance pay, ₹12 lakh as early-bid and group-participation incentives, and ₹2,50,855.80 as a three-month notice-period payout. The amount was received under the Pfizer Healthcare India Private Limited Finance Scheme for Employees at Aurangabad, 2019, which was framed following the company's decision to close the plant.
The tribunal's decision was based on specific terms of Pfizer's scheme that distinguished voluntary retirement from termination. According to Mint, Clause 11(viii) of the scheme stated that employees opting for voluntary retirement would not be entitled to compensation or notice pay under the Industrial Disputes Act because their cessation from employment constituted resignation and did not constitute retrenchment or termination by the company. The tribunal also noted that the scheme's terms stated employees would not raise disputes about their separation because the separation resulted from voluntary resignation under the scheme. The application form showed that Sonawane had voluntarily resigned from Pfizer with effect from February 8, 2019.
The taxpayer initially claimed ₹21,77,119 relief under Section 89 on the basis that the amount represented advance salary, but the Assessing Officer disallowed this relief. As reported by Mint, the CIT(A)/NFAC rejected the taxpayer's argument that the ₹65.21 lakh should be treated as a capital receipt and treated it as taxable under Section 56(2)(xi) as income from other sources. However, the Pune ITAT found that there was no termination of employment by Pfizer and that the employee had voluntarily retired/resigned under the scheme. The tribunal noted that it had consistently held in similar cases that payments received under the Pfizer scheme were capital receipts and were not chargeable to tax.
The tribunal concluded that the lower authorities had not correctly applied the law and had failed to follow the position established in earlier cases involving similarly placed Pfizer employees. According to Mint, the ITAT set aside the order of the CIT(A)/NFAC and directed the Assessing Officer to modify the assessment. For Sonawane, the result was that the ₹65.21 lakh received under the Pfizer scheme was treated as a capital receipt and not brought to tax. His appeal was allowed by the Pune ITAT on June 8, 2026.
