9911796707
|
Home
Issues: Taxability of commuted pension under section 10(10A)(i) of the Income Tax Act, 1961.
Analysis: The petitioner, an income-tax assessee, was deputed by the Ministry of Finance to render services for a joint undertaking and chose to be absorbed in the service of the undertaking, voluntarily retiring from the Government of India. He commuted his pension and was sanctioned a sum as the commuted amount. The Accountant-General instructed the deduction of tax on two-thirds of the commuted amount, leading the petitioner to approach the court under Article 226 of the Constitution, contending that the commuted amount was not liable to tax under section 10(10A)(i) of the Income Tax Act, 1961. The judgment referred to decisions by the Bombay Income-tax Appellate Tribunal, the case of C. P. Ohrie v. Accountant-General, Karnataka, and the case of C. K. Karunakaran v. Union of India. These cases established that commuted pensions are entitled to exemption under section 10(10A)(i) of the Act. The Delhi High Court held that the commuted value of one-third of the pension received by a civil servant on retirement and absorption in a public sector corporation was entirely exempt under the same section. Following the decision of the Delhi High Court, the Central Board of Direct Taxes (CBDT) issued a circular withdrawing previous instructions and accepting the exemption of commuted pensions from tax. The court held that the petitioner's commuted pension was not liable to tax, and therefore, the Accountant-General had no authority to order tax deduction at source. Consequently, the court quashed the communication from the Accountant-General, ruling it as unauthorized, and made the rule absolute in favor of the petitioner, with no costs awarded. In conclusion, the judgment clarified the taxability of commuted pensions under section 10(10A)(i) of the Income Tax Act, 1961, based on previous decisions and circulars issued by the CBDT, ultimately ruling in favor of the petitioner and quashing the unauthorized communication from the Accountant-General for tax deduction at source.
|
