TaxTMI 
TaxTMI 
2023 (5) TMI 691
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....xemption as claimed by the assessee. 2. That the appellant craves the leave to add, alter, substitute and withdraw any or all ground of appeals at the time of or before the date of hearing." 3. Succinctly, the fact as culled out from the records is that the assessee retired on 30.09.2019 from National Insurance Co. Ltd. which is a company wholly owned by central government. Assessee received Rs. 11,97,796 as earned leave encashment of 240 days. Assessee filed Income tax return on 14.09.2020 for assessment year 2020-21 and claimed exemption for leave encashment received in full as per provision of section 10(10AA)(ii). In the proceeding before CPC the assessee contended that leave encashment amount received at the time of retirement is exempt from tax to the extent of eligibility of leave encashment exemption to the highest paid employee in the central government and at present it is Rs. 29.25 lacs. The assessee further contended that he has received lessor amount and claimed exemption on the entire amount of leave encashment received. After considering the reply of the assessee CPC allowed exemption to the extent of Rs. 3,00,000/- and balance amount of leave encashment ....
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....with the order of the ld. CIT(A) the assessee has preferred this appeal before this tribunal on the grounds as raised by the assessee as reiterated here in above para 2. To support the various grounds so raised by the assessee, the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below; "We have submitted a paper book separately. The paper book so submitted is prayed for being considered as part of this submission. With this prayer, we start our reply which is as under: Brief Facts of the case are as under: The assessee is an individual and was serving with National Insurance Company Limited which is a company wholly owned by the Central Government. The assessee filed his return of income on 14.09.2020 where certain amount received by him at the time of retirement were claimed as exempt in accordance with law. Same included amount of Rs 1197796.00 received as Earned Leave Encashment for 240 days which was claimed as exempt under Section 10(10AA). The copy of acknowledgement of return of income filed by the assessee is enclosed as a part of paper book vide Page No. 1. The CPC, Bengaluru issued a notice da....
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....tate Government as the cash equivalent of the leave salary^15 in respect of the period of earned leave at his credit at the time of his ^15retirement ^16[whether] on superannuation or otherwise ; (ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit ^15at the time of his retirement ^16[whether] on superannuation ^15or otherwise as does not exceed ^17[ten] months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement ^16[whether] on superannuation or otherwise, ^18[subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit^19 applicable in this behalf to the employees of that Government] : Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause ^20[shall not exceed the limit so specified] : Provided furth....
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....Central Government or a State Government. In the case of other employees, the exemption will be determined with reference to the leave to his credit at the time of retirement, subject to a maximum of 6 months' leave. For this purpose, the entitlement to leave, shall not exceed 30 days for every year of service. The exemption will be limited to the amount payable for such unutilised leave on the basis of the average salary of the employee for 6 months or Rs. 30,000, whichever is less. In the case of employees retiring before January 1, 1982, the monetary ceiling limit will be Rs. 25,500. The average salary shall be determined on the basis of the salary drawn for the 10 immediately preceding months. In relation to non-Government employees, who retire on superannuation or otherwise after December 31, 1981, the Central Government is being empowered by notification in the Official Gazette, to raise the aforesaid monetary ceiling of Rs. 30,000 keeping in view the maximum amount which will qualify for exemption in the case of Government servants. 2.. Now, we want to discuss the mode in which such notification was required to be issued and in fact have been issued in the past by t....
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....inent to note that the amount which is considered while issuing notification is based on highest salary of Central Government employee. i.e Chief Secretary. A copy of office notes of the CBDT obtained by the assessee from one of his friends who in turn acquired same by RTI is attached as Page No's 39-45 of paper book where the mode of fixing limit is explained in details. Kindly refer to para 3 and 4 of the said office note on Page 39 of paper book where it has been clearly mentioned that the period of 8 months was increased to 10 months as the same was also enhanced for central and State government employees. Kindly also refer Page 44 of paper book where in Para 3 to 5, the manner of fixing limit of Rs 300000.00 has been discussed which is same as is mentioned here in our submissions. As the then salary of maximum basic pay admissible to a government servant was Rs 30000.00, the limit of Rs 300000.00 was fixed (Rs 30000.00 * 10 months) . At present, that is the period when assessee retired from his service, the Basic Pay of highest paid employee in Government who happens to be Cabinet Secretary is Rs 2.50 Lacs per month and for 10 months same is worked out at Rs 25 lacs. As an evi....
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.... the maximum amount of exemption was limited to six months' leave salary, calculated on the basis of average salary drawn during the 10 months immediately preceding his retirement or Rs. 30,000, whichever was less. 3.18 This limit applicable to non-Government employees was required to be raised as a result of the higher amount getting exemption in the case of Central Government employees as a result of the recommendations of the Fourth Pay Commission. To achieve this objective and also to rationalize the provisions, the Amending Act, 1987 has made the following amendments in the said sub-clause (ii) :- (i) The maximum amount that would now be exempt is the equivalent of 8 months' leave salary instead of six months' leave salary as was the case under the old provisions. (ii) The maximum limit of exemption, namely, Rs. 30,000, is not specified in the sub-clause. Instead, it is now provided that the limit may be specified by the Central Government by way of a notification in the Official Gazette having regard to the limit applicable to the Central Government employees. This would avoid frequent changes in the Income-tax Act for the same reasons a....
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....eased in phase wise mode retrospectively depending upon increase in pay of central govt. employees. A copy of relevant extract of budget speech is enclosed as Page No 56 of paper book. It is also reproduced hereunder: "151. Lastly, the limit of Rs. 3 lakh for tax exemption on leave encashment on retirement of non-government salaried employees was last fixed in the year 2002, when the highest basic pay in the government was Rs. 30,000/- pm. In line with the increase in government salaries, I am proposing to increase this limit to 25 lakh" We further submit that as discussed above, the extraordinary increase in limit from Rs 300000.00 to Rs 2500000.00 is not extraneous but based on certain facts and figures and considering the increase in salary of Govt. employees from time to time. We again draw the attention of the H'ble members to the fact that as the maximum salary at present of Central govt. employee is Rs 2.5 Lakhs, liit has been proposed to Rs 25 Lakhs. We thus pray the H'ble bench that due to the inaction of CBDT, burden cannot be imposed upon the assessee and other non government employees. The intention of the legislation was clear to maintain par....
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....s year to such previous year, by notification in the Official Gazette, specify, in this behalf.]] It can be noted that this notification is issued from time to time inspite of use of word "may' as the requirement of issuing notification arises on a contingent event i.e average rise in consumer price index. Thus, here also the word may partakes the character of shall on happening of the event as discussed above. Similarly, we draw the attention of the ld. Members to sub section 10 of Section 10, the relevant extracts of which are reproduced hereunder: (iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month's salary for each year of completed service, 3[calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the....
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....ving regard to the context in which it occurs, and the requirements contemplated for its exercise, have annexed to it an obligation which compels its exercise in a certain way on facts and circumstances from which the obligation to exercise it in that way arises. In other words, it is the context which can attach the obligation to the power compel- ling its exercise in a certain way. The context, both legal and factual, may impart to the power that obligatoriness. Thus, the question to be determined in such cases always is,whether the power conferred by the use of the word "may" has, annexed to it, an obligation that, on the fulfilment of certain legally prescribed conditions, to be shown by evi- dence, a particular kind of order must be made. If the statute leaves no room for discretion the power has to be exercised in the manner indicated by the other legal provisions which provide the legal context. Even then the facts must establish that the legal conditions are fulfilled: A power is exercised even when the Court rejects an applica- tion to exercise it in the particular way in which the applicant desires it to be exercised. Where the power is wide enough to cover both an accept....
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....t mandamus lies to enforce it: that depends on the nature of the duty and the position of the donee". The principle laid down above has been followed consist- ently by this Court whenever it has been contended that the word "may" carries with it the obligation to exercise a power in a particular manner or direction. In such a case, it is always the purpose of the power which has to be exam- ined in order to determine the scope of the discretion conferred upon the donee of the power. If the conditions in which the power is to be exercised in particular cases are also specified by a statute then, on the fulfilment of those conditions, the power conferred becomes annexed with a duty to exercise it in that manner. This is the principle we deduce from the cases of this Court cited before us: Bhaiya Punjalal Bhagwandin v. (1) 5 A.C. 214. Dave Bhagwatprasad Prabhuprasad,(1) State of Uttar Pradesh v. Jogendra Singh,(2) Sardar Govindrao & Ors. v. State of M.P.,(3)) Shri A. C.Aggarwal. Sub-Divisional Magistrate, Delhi & Anr, v. Smt. Ram Kali etc.,(4) Bashira v. State of U.P.,(5) and Prakash Chand Agarwal & Ors. v. M/s. Hindustan Steel Ltd.(6) In the statutory provision under conside....
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....rified so that an interference by this Court under Article 136 of the Constitution, in order to vindicate a correct principle and to meet the ends of justice, is called for. Thirdly, learned counsel for the respondent submitted that the order under appeal before us is not final so that we need not interfere under Art. 136 of the Constitution for this reason. It is true that, this Court does not, as a rule, interfere with interlocutory orders. It is not necessary for us to embark on this occasion on a discussion of the meaning of a "final" order. That is certainly a question fraught with difficulties. It is sufficient for us to observe that our powers of interference under Art. 136 of the Constitution are not confined to those in respect of final orders, although finality of an order is a test which this Court generally applies in considering whether it should interfere under Art. 136 of the Constitution with it. We think that we have indicated sufficiently why, despite the fact that an order staying proceedings under s. 442(b) of the Act may not, strictly speaking, be final, yet, a question of general principle of wide application, as to the circumstances in which an appar....
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....y. May is a must for enabling compliance of provision but there are cases in which, for various reasons, as soon as a person who is within the statute is entrusted with the power, it becomes duty to exercise. Where the language of statute creates a duty, the special remedy is prescribed for non- performance of the duty. In "Raise on Statute Law" (7th Edn.) it is stated that the Court will, as a general rule presume that the appropriate remedy by common law or mandamus for action was intended to apply. General rule of law is that where a general obligation is created by statute and statutory remedy is provided for violation, statutory remedy is mandatory. The scope and language of the statute and consideration of policy at times may, however, create exception showing that Legislature did not intend a remedy (generality) to be exclusive. Words are the skin of the language. The language is the medium of expressing the intention and the object that particular provision or the Act seeks the achieve. Therefore, it is necessary to ascertain the intention. The word "shall" is not always decisive. Regard must be had to the context, subject matter and object of the statutory provision in que....
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....ake cogni- zance" in the context means "must take, cognizance". He has no discretion in the matter, otherwise that section will be violative of Art. 14." We thus hereby pray the Ld. authority to allow this ground raised by the assesse and also impose cost upon the responsibles for not following the law as drafted by legislature. Alternatively, we also pray the H'ble members that as the operation of the decision of H'ble Delhi High Court in the case of Kamal Kumar Kalia & Others vs Union of India & Others, W.P (C ) 11846/2019 is pending and also owing to the fact that notifications in response to budget speech of H'ble Finance Ministers are awaited, some time may be granted to the assessee before making any final decision in the matter (if against the assessee) as same may not be in interest of justice. Thus, the assessee prays that he must be given benefit of any future retrospective notification on the subject matter. With these submissions, we pray the H'ble bench to allow this ground of appeal raised by the assessee. Ground No. 2 That the appellant hereby craves the leave to add, alter, substitute and withdraw any or all grounds of ap....