TaxTMI 
TaxTMI 
2026 (7) TMI 191
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....ee's substantive claims for exemption of ex gratia received under section 10(10B) of the Income-tax Act, 1961, and earned leave encashment received on retirement under section 10(10AA) of the Act. The assessee therefore prays that, in the interest of substantial justice, the appeal be admitted and the claims be decided on merits. 3. The assessee is in appeal contending that the CPC erred in denying exemption of Rs. 12,30,969 for ex gratia under section 10(10B) and Rs. 11,60,420 for earned leave encashment on retirement under section 10(10AA) of the Act. Relying on CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd. [(2012) 349 ITR 336 (Bom.)], the assessee submits that the appellate authority may admit fresh claims and that substantive statutory exemptions cannot be denied merely because of delay or procedural lapse where eligibility is otherwise established. Reliance is also placed on Circular No. 14 (XL-35) dated 11.04.1955, Dayal Singh v. ITO, Harish Kumar v. ITO, Chandraprakash Vasistha v. ITO, and Ravinder Kumar v. State of Punjab to submit that the claims should be admitted and decided on merits to prevent excessive and unjust taxation. 4. The learned Authorized Representat....
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....are justified in taking the stand that while disbursing the leave encashment amounts, they can deduct the tax at source with reference to the provisions of Section 192 of the Act. It is to be noticed that the provisions of Section 192 of the Act provide for the deduction of tax with reference to the payment of salaries. Pension, for the purpose of deduction of tax, is with reference to the mandate under Section 192 of the Act. The provisions of Section 192 of the Act would apply only in a situation where a particular amount paidto an employee is chargeable under the head "salaries". Therefore, ultimately, it is only in a situation where the particular payment is chargeable under the provisions of the Act, the provisions of Section 192 of the Act will apply. It is with reference to the aforementioned position that the issue arising for consideration in this case requires to be analysed. 8. As already noticed, the learned Senior Counsel for the petitioners seeks to rely on the provisions of Section 10(10AA) of the Act, which would read as under: "10. In computing the total income of a previous year of any person, any income falling within any of the following clause....
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....retirement of the petitioner Nos.2 and 3 would fall under clause (ii). As against this, the petitioners contend that their case falls under clause (i). 10. The fact that the 2nd and 3rd petitioners were admittedly employed with the DoT originally is not in dispute. It is only subsequently, upon the formation of the 6th respondent company, that the 2nd and 3rd petitioners have opted to continue with the company. The circumstances, like the afore, are visualised with reference to the provisions of Rule 37A of CCS Rules. Rule 37A of the CCS Rules specifically provides for the conditions for payment of pension on absorption consequent upon conversion of a Government Department into a Public Sector Undertaking (PSU). In the case at hand, as noticed earlier, the DoT has been converted as the 6th respondent herein, and therefore, there is no dispute that the provisions of Rule 37A of the CCS Rules would apply. With respect to afore, the provisions thereunder also requires to be noticed. For ease of reference, the relevant provisions of Rule 37A of the CCS Rules are extracted as under: "37-A. Conditions for payment of pension on absorption consequent upon conversion of a Governmen....
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.... to be made by Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited to the Government and the manner in which financial liabilities on this account shall be met. (24) The arrangements under sub-rule (23) shall be applicable to the existing pensioners and to the employees who are deemed to have retired from the Government service for absorption in Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited and shall not apply to the employees directly recruited by the Bharat Sanchar Nigam Limited for whom they shall devise their own pension schemes and make arrangements for funding and disbursing the pensionary benefits." 11. The provisions of sub-rule (4) of Rule 37 A of the CCS Rules specifically states that upon absorption of the Government servants as the employees of the PSU, that shall take effect from the date on which their options are accepted by the Government, and from the date of such acceptance, those employees shall cease to be Government servants and they shall be deemed to have retired from the Government service. Sri.Jose Joseph, the learned Standing Counsel for the Income Tax Department, seeks to rely on the aforementioned provisions t....
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....ted by Sri. Jose Joseph, on a literal reading of the provisions of clause (i), it is only in a situation where a person retires from the service of the Central Government, the benefits provided thereunder can be applied. But it is to be noticed that the framers of the statute did not visualise a situation like the present one, and that is why similar provisions as in CCS Rules, taking care of such aspects, have not been introduced in the provisions at that point of time. A Division Bench of this Court in State of Kerala v. Falcon Infrastructure Limited [2025 (4) KHC 375] has already found that provisions under different enactments should be read harmoniously so that provisions of one statute are not invoked to defeat the rights/privileges extended under another Statute. I have also followed the said decision in Manojkumar P.P v. Secretary, Thalassery Municipality [2025 (6) KHC 371]. 15. Therefore, insofar as the provisions of the CCS Rules referred to above specifically treat the cases of the employees of the BSNL, who joined the service of the BSNL from the DoT in a particular manner, I am of the opinion that the interpretation provided in Ext.P11 cannot be accepted. 16. ....