The petitioners, who were the employees of the Public Sector Undertaking and Nationalised Banks, filed writ contending that they were discriminated against Central Government and State Government employees. The Central Government and State Government employees are granted complete exemption in respect of the cash equivalent of the leave salary for the period of earned leave standing to their credit at the time of their retirement. Dismissing the petition the Court held that merely because Public Sector Undertaking and Nationalised Banks are considered as ‘State’ under article 12 of the Constitution of India for the purpose of entertainment of proceedings under Article 226 of the Constitution and for enforcement of fundamental right under the Constitution, it does not follow that the employees of such Public Sector Undertaking, Nationalised Banks or other institutions which are classified as ‘State’ assume the status of Central Government and State Government employees. Accordingly the petition is rejected.
Kamal Kumar Kalia v. UOI (2020) 268 Taxman 398 /187 DTR 433/ 313 CTR 779(Delhi) (HC)
S. 10(10AA) : Leave salary–Government employee-Leave salary- Employee of the Central Government or State Government- Retired employees of PSUs and nationalised bank cannot be treated as Government employees-Not entitled to get full tax exemption on leave encashment after retirement/superannuation. [Art. 12, 226]
This is injustice with bank employees. For every govt.scheme bank employees are targeted to make them successful. For everything there is step mother treatment for bankers. Let it be leave encahment or pension a vast difference. It happens in India.Phir bhi mera Bharat Mahan.
Leave encashment amount less than the entitlement amount of the cabinet secretary. Bank & LIC are wrongly deducting tax at source on payment of leave encashment at the time of retirement.
Because
As per chapter 3 of income tax act,1961 the Rule issued by CBDT is for Sub-clause 10(10AA) ii employees is as below mentioned.
“Subject to such limit as the central govt may by notification in the official gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that government”
It is clear from above rule that the exemption on leave encashment for the employees covered under sub-clause 2 is allowed by CBDT up to the limit of Central government employees.
Gazette notification is only a medium to inform the limit of the government employee. The importance of gazette notification is not more than that. The gazette notification is not informing the exemption limit because what is the exemption limit, the above rule already declared. As per this rule, the exemption limit is equal to the limit of government employees.
Since beginning the cabinet secretary is getting the highest salary in government so entitlement of leave encashment of cabinet secretary is the limit of government employees. At present entitlement of leave encashment of the cabinet secretary is Rs. 29.25 lacs. All employees of Banks & LICs are getting much less leave encashment at the time of retirement in comparison to cabinet secretary. So none of the employees from LIC or Banks are coming under the range of tax limit under sub-clause 10(10AA) ii of income tax act,1961.
As per above rule CBDT is bound to issue gazette notification as and when the leave encashment entitlement of the cabinet secretary is enhanced. CBDT wants to give the tax exemption under sub-clause 10(10AA) ii of income tax act,1961 up to the limit of government employees. If CBDT does not want to give the exemption up to the limit of government employees. Why did they write that the amount of notification is equal to the limit of government employees ?
In view of the above it is very clear what is the rules & what is the purpose of notification.
In the last gazette notification no. SO 588 E dated 31.05.2002 issued by CBDT, written the following sentence:
“In exercise of the powers conferred by Sub- Clause ii of clause (10AA) of section 10 of the income Tax Act, 1961, the central government having regard to the maximum amount receivable by its employee as cash equivalent of leave salary in respect of the period of earned leave at their credit at the time of their retirement , whether superannuation or otherwise, hereby specifies the amount of Rs. 3.00 Lacs as the limit in relation to employees mentioned in that Sub-clause who retire, whether superannuation or otherwise after the 1st day of April,1998.” (Copy attached)
With the above notification It is again clear that the amount mentioned in gazette notification is linked with maximum amount receivable by government employees. On 2nd April 1998, the exemption limit of a government employee was Rs. 3.00 Lacs & also for employees of sub-clause 10(10AA) ii it was also Rs. 3.00 Lacs. After that government employees are getting tax exemption up to Rs. 29.25 lacs while employees of sub-clause 10(10AA)ii are getting only up to Rs. 3.00 Lacs. How is it possibile ?
In view of the above it is clear that the banks & LICs had not properly studied the original rule issued by CBDT, and also not interpreted the rule thoroughly / properly.
If CBDT forgot to issue the notification from the last 19 years, that does not make any difference as the limit under sub-clause 10(10AA) ii of income tax act,1961 is linked with the limit of government employee i.e.cabinet secretary.
As per rules
The exemption for the employee of sub-clause 10(10AA) ii :- Equal to limit of a government employee
What is the limit of government employees:- How would the drawing disbursing officers know ?
The gazette notification:- It is only a tool to inform drawing disbursing officers the limit of government employee i.e. entitlement of government employee who is getting the highest salary in central Government.
The CBDT issued 10 gazette notification from 1982 to 2002, after 2002 they forgot to issue the gazette notification but non issuance of notification does not make any difference as the rule is absolutely clear that employee coming under sub-clause 10(10AA) ii will get the exemption benefit equal to the limit of the government employee. The last gazette notification of Rs. 3.00 lacs is not valid as on the day because this is not as per rules of CBDT & the same was prepared on the basis of salary of the cabinet secretary Rs. 30,000/- in 1998 while the salary of the cabinet secretary is Rs. 2.925 lacs as on the day. So the exempted limit for employees of sub-clause 10(10AA) ii is Rs. 29.25 lacs as per rules.
Hence as per the above rules, the employees of Banks & LICs are not coming in the range of tax because they are receiving l
one country one tax.equal treatment of tax.rates of tax is not different for everyone .there should not be the vialation of constutional fundamental rights.
CBDT has put the limit of 3 lakh .why and on what basis.please refer the base rule of CBDT of highest government employee.
Unless we stay united and fight as a unit,we will just be barking than acting. Sri.Kalia is fighting alone. Whether we need to file a case seperately as a unit to be taken forward.I am in B’luru and willing to pay my part of legal fees. Request others to join.
After approval of Budget for FY 2023-24, whether
Sub- Clause ii of clause (10AA) of section 10 of the income Tax Act, 1961 has been modified and if so how? By gazette notification or otherwise. Whether there is change in clauses other the amount.
The recent increased limit in pl encashment taxability from 3 to 25 lcs is wef 01.04.23. It is not clear AY or FY. If AY, is it not applicable to those who retired in last FY because they’re filing return now. Can it be clarified?
The enhanced limit is effective from leave encashment on retirement paid from 01-04-2023 onwards. Usually such benefits are made applicable from retrospective date or at least from the date announcement is made in the Parliament. Further, this amount is payable on the leave accumulated and earned over a large no. of years. All the retiree’s will suffer because of Kamal Kumar Kalia who demanded parity with Govt Employees which Hon’ble Court rejected. we should have contested on the basis of clause that the amount will be reviewed on periodical basis and also keeping in view the inflation from 2001 onwards . The Income Tax Authorities are vindictive in nature and they have intentionally made the enhancement effective from 01-04-2023. One blunder has impacted thousands of employees who retired in the last few years.
In the above case Hble Delhi HC has granted time upto 19-04-2023 to file an affidavit to UOI. As Govt notification dated 31-05-2002 on the subject was made operable retrospectively from 01-04-1998 then why the notification dtd 24-05-2023 applies to those who retired on or after 01-04-2023.