Commuted pension exemption under Income-tax law does not extend to terminal benefit payable under rule 37A(1)(b).

Section 10(10A)(i) exempts only commuted pension under the Commutation Rules, or a similar scheme where those Rules do not apply. A terminal benefit payable under rule 37A(1)(b) of the CCS (Pension) Rules was held not to qualify because it was not a commutation payment under the Commutation Rules, and the employee remained within that regime. The Court also noted that the provision does not permit double exemption for the same class of civil servants under two different rule sets. The claim for exemption and non-deduction of tax therefore failed.

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Issues: Whether the terminal benefit payable under rule 37A(1)(b) of the Central Civil Services (Pension) Rules, 1972 was exempt from tax under section 10(10A)(i) of the Income-tax Act, 1961.

Analysis: The exemption in section 10(10A)(i) covers commuted pension received under the Commutation Rules, or payment received under a similar scheme applicable to members of the civil service of the Union to whom the Commutation Rules do not apply. The terminal benefit under rule 37A(1)(b) was not a commutation payment under the Commutation Rules, though it was in the nature of a benefit in lieu of pension. The Court held that the statutory condition for the latter limb of section 10(10A)(i) was not satisfied because the petitioner was still a person to whom the Commutation Rules applied, and the provision did not permit double exemption for the same class of servants under two different sets of rules.

Conclusion: The terminal benefit under rule 37A(1)(b) was not exempt under section 10(10A)(i) and the claim for non-deduction of tax failed.

Ratio Decidendi: Section 10(10A)(i) exempts only commuted pension under the Commutation Rules, or under a similar scheme where those Rules do not apply; a terminal benefit payable under rule 37A(1)(b) to a servant still governed by the Commutation Rules is not covered by the exemption.

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