Income Tax Act, 1961: s.10(10)(ii) – Exemption – Appellants are employees of Coal India Ltd. – In terms of Office Memorandum of Government of India dated 26.11.2008, the upper limit of gratuity was increased to Rs.10 lakhs w.e.f 01.01.2007 – Payment of such gratuity was made to appellants in terms of Office Memorandum – However, later on Payment of Gratuity Act was amended which received assent of President on 17.05.2010 – In terms of Amending Act, a notification issued by Government of India on 24.05.2010 appointing the said date as the date on which the Amending Act came into force – Case of appellant was that the tax was deducted at source when the gratuity was paid to the appellants before the commencement of the Amending Act – Appellants thus challenged the date of commencement as 24.05.2010 but asserted that it should be made effective from 01.01.2007 and consequently they would not be liable for deduction of tax on the gratuity amount – Held: Sub-section (5) of s.4 of the Gratuity Act protects the right of an employee to receive better terms of gratuity under any award or contract with the employer – The gratuity paid to the appellants on the strength of Office Memorandum dated 26.11.2008 would fall in the said sub-section – However, what is exempt from the Income Tax Act is the amount of gratuity received under the Gratuity Act to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of s.4 of the Gratuity Act – The Gratuity Act contemplated Rs.10 lakhs as the amount of gratuity only from 24.05.2010 – Such gratuity is the amount payable only once – Thus, the cut-off date cannot be said to be illegal, it being one-time payment – Therefore, such amendment in the Gratuity Act cannot be treated to be retrospective – The benefit paid to the appellants under the Office Memorandum is not entitled to exemption in view of specific language of s.10(10)(ii) of the Income Tax Act – ORS.
Payment of Gratuity (Amendment) Act, 2010 – s.1(2) – Payment of Gratuity, 1972 – s.4.
Dismissing the appeal, the Court
HELD: The date of commencement fixed by the Executive in exercise of power delegated by the Amending Act cannot be treated to be retrospective as the benefit of higher gratuity is one-time available to the employees only after the commencement of the Amending Act. The benefit paid to the appellants under the office memorandum is not entitled to exemption in view of specific language of Section 10(10)(ii) of the Income Tax Act. [Para 17][430-F-H]
Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited (2015) 1 SCC 1 : [2014] 12 SCR 1037; D. S. Nakara & Ors. v. Union of India (1983) 1 SCC 305 : [1983] 2 SCR 165; State Government Pensioners’ Association & Ors. v. State of Andhra Pradesh (1986) 3 SCC 501 : [1986] 3 SCR 383; Union of India v. All India Services Pensioners’ Association & Anr. (1988) 2 SCC 580 : [1988] 2 SCR 697; Sri Vijayalakshmi Rice Mills, New Contractors Co. & Ors. v. State of Andhra Pradesh (1976) 3 SCC 37 : [1976] 3 SCR 775; Orient Paper and Industries Ltd. & Anr. v. State of Orissa & Ors. (1991) 1 Suppl. SCC 81 : [1990] 2 Suppl. SCR 480; Himachal Road Transport Corporation & Anr. v. Himachal Road Transport
Corporation Retired Employees Union (2021) 4 SCC
502 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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