Petitioner sought declaration that gratuity exemption limits amended by notifications in 2018 and 2019 apply retroactively from 2016. Court held amendments apply only from notified dates; dismissed petition.
Writ petition dismissed. No costs. Connected miscellaneous petition closed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
The Hon'ble Mr. A.P.SAHI, THE CHIEF JUSTICE
and
The Hon'ble Mr. Justice SENTHILKUMAR RAMAMOORTHY
W.P.No.33725 of 2019 &
W.M.P.No.34198 of 2019
G.Srinivasan
... Petitioner-in-Person
..vs..
1.Union of India
Ministry of Labour,
Represented by Secretary,
Shram Shakti Bhawan,
Rafi Marg,
New Delhi-10 001.
2.Union of India,
Ministry of Finance,
Represented by Secretary,
Ministry of Finance,
North Block, New Delhi-110 001.
3.The Chairman, CBDT,
Ministry of Finance,
North Block,
New Delhi-110 001. ... Respondents
PRAYER : Petition filed under Article 226 of the Constitution of India, praying to issue a writ of Declaration declaring that
A.1 Appointed date of Notification S.O.1419 (E) dated 29th March 2018 issued by Ministry of Labour and Employment is declared as 1st January 2016 instead of 29th March, 2018 by replacing the words "29th day of March, 2018" appearing in the notification with the words "1st day of January, 2016" retaining other terms in the notification.
A.2 Notification No.S.O.1213 (E) dated 08.03.2019 of CBDT, Ministry of Finance is declared to have been implemented w.e.f.1st January 2016 instead of 29th March 2018 by replacing the words "29h day of March, 2018" appearing in the notification with the words "1st day of January, 2016" retaining other term in the notification.
B. Direct the Respondent-3 to return and refund the Income Tax deducted at Source from the Petitioner in the Financial Year 2018-19 on Gratuity, received as superannuation benefit, treating the same as income and render justice.
For Petitioner : Mr.G.Srinivasan, Party-in-person
For Respondents : Mr.Venkataswamy Babu, Spl. Panel Counsel
for R1 & R2 Mrs.Hema Muralikrishnan for R3
O R D E R
SENTHILKUMAR RAMAMOORTHY J.,
By this writ petition, the petitioner prays for a Writ of Declaration in respect of the Notification S.O.1419 (E) dated 29.03.2018 of the Ministry of Labour and Employment [Notification S.O. 1419(E)] to declare that the appointed date specified therein should be 01.01.2016 instead of 29.03.2018. Likewise, a similar declaration is prayed for in respect of the Notification S.O.1213 (E) dated 08.03.2019 of the Central Board of Direct Taxes, Ministry of Finance [Notification S.O. 1213 (E)]. In both Notifications, it is prayed that the words “29th day of March 2018”, as contained in the aforesaid notifications, should be substituted by the words “1st day of January 2016”. By way of consequential relief, the Petitioner prays for the refund of income tax that was deducted at source for the financial year 2018-19 on the gratuity paid to the Petitioner.
from income tax whereas he was required to pay income tax on the second tranche of Rs.10 lakhs because he retired on 28.02.2018 and not on or after 29.03.2018, which is the appointed date under Notification S.O.1419(E) and Notification S.O. 1213(E) .
Limited v. Workmen, AIR 1958 SC 578; D.D.Tiwari v. Uttar Haryana Bijili Vitram Nigam Ltd. 2015 LLR 126 (SC); and Rashtriya Mill Mazdoor v. National Textiles Corporation (South Maharashtra) Limited (1996) 1 SCC 313, for the principle that gratuity is not a bounty or charity but is an amount paid for services rendered by the employee.
Therefore, she submits that the writ petition is liable to be rejected.
“Incomes not included in total income
(10)(ii) any other gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 4 of that Act."
Gratuity [Amendment] Act, 2010, Rs.10 lakhs was substituted in Section 4(3) for Rs.3,50,000/-. This amendment came into effect on 24.05.2010. Needless to say, until 23.05.2010, the maximum amount specified in Section 4(3) was Rs.3,50,000/- and employees would have been entitled to exemption of income tax only up to a maximum of Rs.3,50,000/-. As regards the Petitioner, as on the date of his retirement on 28.02.2018, Section 4(3) specified the maximum limit of Rs.10 lakhs. By virtue of Section 10 (10)(ii) of Income Tax Act, this became the exemption limit for the purposes of payment of income tax. Consequently, the Petitioner's gratuity income was exempt from income tax up to to the said limit of Rs.10 lakhs. This limit in the Payment of Gratuity Act was amended pursuant to the Payment of Gratuity (Amendment) Bill of 2017, which was introduced in Parliament on 23.10.2017, but admittedly enacted with effect from 29.03.2018. In this writ petition, the Petitioner does not challenge Section 10(10)(ii) of the Income Tax Act, as it stood on the date of his retirement. Instead, he seeks a declaration in respect of two notifications, namely, S.O. 1419 (E) and S.O. 1213 (E), whereby the amendments to the Payment of Gratuity Act and the Income Tax Act were notified. The relevant amendment notifications are as under:
S.O.1420 (E)-- In exercise of the powers conferred by sub-section (3) of Section 4 of the Payment of Gratuity Act, 1972 (39 of 1972), the Central Government hereby specifies that the amount of gratuity payable to an employee under the said Act shall not exceed twenty lakh rupees.
MINISTRY OF FINANCE (Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION
New Delhi, the 8th March, 2019 (Income-tax)
S.O.1213 (E)-- In exercise of the powers conferred by sub-section (iii) of clause (10) of section 10 of the Income-tax Act, 1961 (43 of 1961), and in supersession of Ministry of Finance, Department of Revenue, notification number S.O.141(E), dated the 11th June, 2010, except as respects things done or omitted to be done before such supersession, the Central Government, having regard to the maximum amount of any gratuity payable to employees, hereby specifies twenty lakh rupees as the limit for the purposes of the said subclause in relation to the employees who retire or become incapacitated prior to such retirement or die on or after the 29th day of March, 2018 or whose employment is terminated on or after the said date."
Upon perusal of Notifications S.O. 1419 (E) and S.O. 1420(E), it is evident that the increase in ceiling limit under the Payment of Gratuity Act is with effect from 29.03.2018. Likewise, on examining the Notification S.O.1213 (E), it is abundantly clear that the increased exemption limit of Rs.20 lakhs under the Income Tax Act is applicable to those who retire or die on or after 29.03.2018. As stated earlier, the Petitioner does not challenge Section 10(10) of the Income Tax Act or even Notification S.O. 1213 (E). Instead, he seeks a declaration whereby the amendments made by Parliament with effect from 29.03.2018 should be applied with retrospective effect from 01.01.2016. While Parliament has the power to legislate retrospectively, the intention to legislate with retrospective effect should be expressly stipulated
in the law concerned. In this case, it is expressly stated that the amendment to Section 4(3) of the Payment of Gratuity Act would take effect from 29.03.2018. As a corollary, the increased exemption limit in the Income Tax Act is made applicable only to persons who retire on or after 29.03.2018. In the absence of a challenge to Section 10(10) of the Income Tax Act, in our view, the relief prayed for cannot be granted.
Payment of Gratuity Act, there is no discrimination as regards the date of entry into force of the increased ceiling. The party-in-person alleges that the impugned notifications are discriminatory on the basis that Central Government employees and employees of public sector undertakings should be treated on a par. In our view, this contention cannot be countenanced. The terms and conditions of employment vary significantly as between employees of the Central Government and those of public sector undertakings and, indeed, even as between different public sector undertakings. Therefore, these classes of employees do not constitute a single homogeneous class. Consequently, the contention that employees of public sector undertakings, such as the Petitioner, should be treated in the same manner as regards gratuity as the employees of the Central Government is rejected.
“53.After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State.
“66.2.When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue.”
Act. The undoubted position is that Section 4(3) of the Payment of Gratuity Act specified the limit of Rs.10 lakhs as on the date of retirement of the Petitioner. This limit was increased to Rs.20 lakhs by an amendment which admittedly came into force only on 29.03.2018. As a corollary, the exemption limit was raised to Rs.20 lakhs by an amendment to the Income Tax Act only in respect of persons who retired or died on or after 29.03.2018. In Dilip Kumar, the Supreme Court restated the principle that even an ambiguity in an exemption notification, especially as regards applicability, should be resolved in favour of the revenue. A fortiori, when there is no ambiguity either in Section 10(10)(ii) of the Income Tax Act, as it stood as on the date of retirement of the Petitioner, or in the amendment Notification S.O.1213(E), the applicable exemption limit cannot be raised by an order of Court to Rs.20 lakhs as regards the Petitioner.
Sd/-
Assistant Registrar (CS-VII) //True Copy//
Sub Assistant Registrar
kal
To
1.The Secretary,
Ministry of Labour,
Union Of India,
Shram Shakti Bhawan,
Rafi Marg, New Delhi-10 001.
2.The Secretary, Ministry of Finance, Union of India, North Block, New Delhi-110 001.
3.The Chairman, CBDT, Ministry of Finance, North Block, New Delhi-110 001.
+1cc to Mr.Hema Muralikrishnan, Advocate, S.R.No. 38597
W.P.No.33725 of 2019 &
W.M.P.No.34198 of 2019
NRL (CO)
GN(11/12/2020)
3 issues framed by the court
Whether exemption notifications under the Income-tax Act regarding gratuity limits can be applied retrospectively from 1st January 2016 instead of the notified date of 29th March 2018.
Whether employees of public sector undertakings and central government employees constitute a single homogeneous class to preclude discrimination based on retirement date.
Whether the benefit of ambiguity in exemption notifications must be resolved in favour of the taxpayer or the revenue.
Colour shows how this judgement treated each authority
D.S. Nakara v. Union of IndiaDistinguished¶21
D.S. Nakara v. Union of India (1983) 1 SCC 305 · Who else cites this
Commissioner of Customs v. Dilip KumarRelied on¶49
Dilip Kumar (2018) 9 SCC 1 · Who else cites this
Menaka Gandhi v. Union of IndiaExplained¶25
Menaka Gandhi v. Union of India (1978) 1 SCC 248 · Who else cites this
Express News Paper Limited v. WorkmenExplained¶24
Express News Paper Limited v. Workmen, AIR 1958 SC 578 · Who else cites this
5 provisions across 4 enactments
G. Srinivasan
Union of India, Ministry of Labour
Union of India, Ministry of Finance
The Chairman, CBDT
Senthilkumar Ramamoorthy
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
Senthilkumar Ramamoorthy
Parties & counsel
