Retired Employees' Petition for Retrospective Tax Exemption on Leave Salary Dismissed; Court Upholds Executive's Authority.

The HC dismissed the writ petitions filed by retired employees seeking retrospective revision of the income limit for tax exemption on earned leave salary under Section 10AA(ii) of the Income Tax Act 1961. The Court held that revising the limit is a policy decision within the Executive's jurisdiction, not the judiciary's. Petitioners were granted liberty to approach the Government for relief. The Court emphasized the doctrine of separation of powers and refrained from issuing a mandamus. All pending interlocutory applications were dismissed, and the case was disposed of, leaving the decision to the Executive.

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Issues:
Retirement benefits - Tax exemption on earned leave salary - Revision of income limit for taxing purposes under Section 10AA (ii) of the Income Tax Act 1961 with retrospective effect.

Analysis:
The petitioners, retired employees, sought a mandamus to review the income limit for taxing purposes on earned leave salary under Section 10AA (ii) of the Income Tax Act 1961 with retrospective effect. The provision allows for exemption on encashment of earned leave salary, subject to the limit specified by the Central Government. The last notification regarding this limit was issued in 2002, and despite subsequent pay revisions, no further notifications were issued until 2023, setting the upper limit at Rs. 25 lakhs. The petitioners retired before this latest notification and had tax deducted above the previous limit of Rs. 3 lakhs. The Court acknowledged the sympathy for the petitioners but held that the power to issue such notifications lies with the Executive, not the judiciary. The Court cited the doctrine of separation of powers and the limitation on its powers in refraining from mandating the revision of the upper limit retrospectively.

The Revenue's Standing Counsel mentioned a case where the Delhi High Court directed the Government to consider revising the upper limit, but the notification was only issued in 2023, effective from 01.04.2023. The Court expressed its inability to issue a writ of mandamus to revise the upper limit for employees who retired before the latest notification, emphasizing that such policy decisions fall within the Executive's jurisdiction. The Court disposed of the writ petitions, granting the petitioners the liberty to approach the Government for the sought reliefs, leaving the decision to the Executive. Any pending interlocutory applications were dismissed in light of the judgment.

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