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Issues Involved:
1. Whether interest income accrued on the credit balance in the provident fund after retirement qualifies for exemption from income-tax. 2. Validity of reassessment proceedings initiated u/s 148 of the IT Act, 1961. 3. Applicability of alternative remedies under s. 246 and s. 253 of the IT Act, 1961. Summary: Issue 1: Exemption of Interest Income from Income-Tax The core question was whether interest income accrued on the credit balance maintained by the employees of the Punjab State Electricity Board in their provident fund (PF) after retirement qualifies for exemption from income-tax. The petitioners, senior citizens and retirees, argued that under the Punjab State Electricity Board Provident Fund Regulations, 1960 (the 1960 Regulations), specifically regn. 38, the interest component on credit balance retained in the PF is exempted from tax as per Chapter-III, s. 10(11) of the IT Act, 1961. The court noted that s. 10(11) of the 1961 Act clearly exempts any payment from a PF to which the Provident Funds Act, 1925 (the 1925 Act) applies. The court also referenced the Central Board of Direct Taxes (CBDT) clarification dated 15th June 2006, which confirmed that interest on GPF is exempt from income-tax. Issue 2: Validity of Reassessment Proceedings u/s 148 The respondents initiated reassessment proceedings against the petitioners, issuing notices u/s 148 of the 1961 Act for different assessment years. The petitioners contended that the interest income could not be taxed under the head 'Income from other sources' as it was exempt under s. 10(11) of the 1961 Act. The court found that the reassessment proceedings were unjustified as the interest income from the PF retained its exempt status under the 1925 Act and the 1960 Regulations. The court quashed the notices issued u/s 148, directing that the interest income accrued on the PF credit balance retained after retirement should continue to enjoy exemption from income-tax. Issue 3: Applicability of Alternative Remedies The respondents argued that the writ petition was not maintainable as the petitioners had an effective statutory remedy of appeal u/s 246 and further appeal u/s 253 of the 1961 Act. The court, however, held that the availability of an alternative remedy does not constitute an absolute bar to the filing of a writ petition. Given the circumstances, including the age and number of petitioners, the court deemed it appropriate to exercise its jurisdiction under Art. 226 of the Constitution to prevent gross injustice and avoid prolonged litigation. Conclusion: The court ruled in favor of the petitioners, holding that the interest income accrued on the credit balance in the PF after retirement qualifies for exemption from income-tax. The reassessment proceedings initiated u/s 148 of the 1961 Act were quashed, and the respondents were directed to extend the benefit of exemption from income-tax to the interest income as per regn. 38 of the 1960 Regulations.
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