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Interpretation of section 10(10) of the Income-tax Act, 1961 regarding the exemption of gratuity received by an individual from multiple employers under different sub-clauses. Detailed Analysis: Issue 1: Interpretation of Section 10(10) of the Income-tax Act, 1961 The case involved a question referred by the Income-tax Appellate Tribunal regarding the exemption of gratuity received by the assessee from Rallis India Ltd. under section 10(10)(iii) for the assessment year 1977-78. The primary contention was whether the total exemption limit of Rs. 30,000 for gratuity received from multiple employers should include the amount already exempted in a previous assessment year. The court analyzed the provisions of section 10(10) before and after the amendment by the Finance Act, 1974. The amendment brought changes to the exemption limits and categorized gratuities received by employees of statutory corporations under sub-clause (iii) of section 10(10). The court examined the applicability of the second proviso to section 10(10)(iii) and the interpretation of the term "this clause" within the context of the sub-clauses. It concluded that the term "this clause" in the second proviso pertains only to sub-clause (iii) and not to all three sub-clauses of section 10(10). Issue 2: Application of Finance Act, 1974 The court deliberated on the retrospective application of the Finance Act, 1974, which came into force on April 1, 1975. The assessee had availed full exemption of Rs. 30,000 under section 10(10) in 1968 when gratuity was received from Air India. The contention was whether the Finance Act, 1974, could be applied retrospectively to aggregate the exempted amounts from gratuities received from different employers. The court emphasized that the amendment aimed to remove disparities between gratuities received by employees in the private sector and statutory corporations, subjecting them to a common ceiling limit of Rs. 30,000. It highlighted that the Finance Act, 1974, specifically addressed the aggregation of tax-exempt gratuities and applied to all gratuities received from statutory corporations or private employers. Conclusion: The court ruled against the assessee, stating that the entire gratuity received from Rallis India Ltd. was taxable under sub-clause (iii) of section 10(10) read with the second proviso. It upheld the Assessing Officer and the Appellate Assistant Commissioner's decision that the assessee had already availed full exemption under section 10(10) when receiving gratuity from Air India. The judgment clarified the application of the Finance Act, 1974, in aggregating tax-exempt gratuities and affirmed the common ceiling limit of Rs. 30,000 for all types of gratuities under section 10(10)(iii).
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