H.S. Sidhu, J.M.: This is appeal filed by assessee against order of learned CIT(A), Bilaspur dt. 28th July, 2005 for asst. yr. 2003-04 on following effective grounds: "(1) That AO has erred in allowing exemption under s. 10(10C) at Rs. 1,40,679 instead of Rs. 5,00,000 which is unjustified. (2) That AO has erred in not allowing relief under s. 89(1) on account of VRS amount despite fact VRS receivable has been taxed as salary income. (3) That AO has erred in taxing income on accrual/receivable basis i.e., income from VRS at Rs. 7,03,395 but not allowing claim of exemption under s. 10(10C) at Rs. 5,00,000 which is arbitrary and unjustified." facts, in brief, leading to dispute are that employer of assessee has determined voluntary retirement benefit at Rs. 7,03,395 and out of it, sum of Rs. 1,40,679, i.e., one-fifth of VRS amount was received in previous year relevant to asst. yr. 2003-04. balance amount was received in four instalments in next financial year. AO granted exemption under s. 10(10C) to extent of Rs. 1,40,679 actually received during year. learned CIT(A), in appeal, upheld action of AO. Aggrieved by order of learned CIT(A), assessee has filed present appeal before Tribunal. Before us, learned Authorised Representative for assessee vehemently argued that learned CIT(A) erred in upholding action of AO. He invited our attention to Circular No. 7 of 2003, dt. 5th Sept., 2003 [(2003) 184 CTR (St) 33] (copy is filed on record) wherein Explanatory Notes have been given in respect of some provisions of Finance Act, 2003. While explaining provision in respect of exemption of amount received under VRS compensation allowable even if it is receivable or received in instalments. He submitted that in this circular, it has been explained that any amount not exceeding Rs. 5 lakhs (even if received in instalments) by employee on his voluntary retirement will not be included in computing total income of such employee. In view of above circular, he submitted that lower authorities were not justified in rejecting claim of assessee. learned Departmental Representative, on other hand, kly relied on orders of Revenue authorities. We have considered facts of case, rival contentions and carefully gone through circular cited by learned Authorised Representative of assessee. While explaining provisions in respect of exemption of amount received under VRS compensation allowable even if it is receivable or received in instalments, in circular, it has been clarified as under: "Under existing provisions contained in cl. (10C) of s. 10, any amount received by employee of public sector company or any other company or n authority established under Central, State or Provincial Act or local authority or co-operative society or University, or Indian Institute of Technology, or State or Central Government or institution having national/State level importance, or institute of management, notified by Central Government, etc. at time of voluntary retirement or termination of his service in accordance with any scheme or schemes of voluntary retirement, or in case of public sector company, scheme of voluntary separation, to extent such amount does not exceed five lakh rupees, is not included in computing total income of such employee. However, some of employees availing VRS were facing problems in case amount was given to them in instalments, over number of years. To solve this problem, cl. (10C) of s. 10 has been amended by Finance Act, 2003 to provide that any amount not exceeding five lakh rupees received or receivable (i.e., even if received in instalments) by employee on his voluntary retirement or termination of his service will not be included in computing total income of such employee. Other conditions, as well as overall limit shall, however, remain unchanged." In view of above clarification, we are of considered opinion that Revenue authorities erred in denying claim of exemption to assessee. claim of assessee is in accordance with law and Revenue authorities should have allowed same. We direct AO to allow claim of assessee of exemption under s. 10(10C) to extent of Rs. 5 lakhs as claimed by assessee. In result, appeal of assessee is allowed. *** FIRTURAM YADAV v. ASSISTANT COMMISSIONER OF INCOME TAX