34. Kamal Kumar
Kalia vs. UOI; [2019] 111
taxmann.com 409 (Delhi) Date of order:
8th November, 2019
Exemption u/s
10(10AA) of ITA, 1961 – Leave salary (government employees) – Government
employees enjoy protection and privileges under Constitution and other laws
which are not available to other employees and government employees form a
distinct class; they are governed by different terms and conditions of
employment – Consequently, retired employees of PSUs and nationalised bank
cannot be treated as government employees and, thus, they are not entitled to
get full tax exemption on leave encashment after retirement / superannuation
u/s 10(10AA)
The petitioners, who were employees of Public Sector Undertakings and
nationalised banks, filed a writ contending that although they were Central and
State Government employees, they were discriminated against. They were granted
complete exemption in respect of the cash equivalent of leave salary for the
period of earned leave standing to their credit at the time of their
retirement, whether on superannuation or otherwise. However, all others,
including the employees of PSUs and nationalised banks, are granted exemption
only in respect of the amount of leave salary payable for a period of ten
months, subject to the limit prescribed.
The Delhi High Court dismissed the writ petition and held as under:
‘i) So far as the challenge to
provisions of section 10(10AA) of the Income-tax Act, 1961 on the ground of
discrimination is concerned, there is no merit therein. This is because
employees of the Central Government and the State Government form a distinct
class and the classification is reasonable having nexus with the object sought
to be achieved. The Central Government and State Government employees enjoy a
“status” and they are governed by different terms and conditions of employment.
Thus, Government employees enjoy protection and privileges under the
Constitution and other laws, which are not available to those who are not
employees of the Central and State Governments.
ii) There is no merit in the
submission of the petitioner that the employees of PSUs and nationalised banks
are also rendering services for the government and such organisations are
covered by Article 12 of the Constitution of India as “State”. Merely because
PSUs 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 rights under
the Constitution, it does not follow that the employees of such public sector
undertakings, nationalised banks or other institutions which are classified as
“State” assume the status of Central Government and State Government employees.
iii) Therefore, the instant
petition is rejected, insofar as the petitioners’ challenge to the provisions
of section 10(10AA) is concerned.’
