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Issues:
1. Interpretation of Section 10(10A) of the Income Tax Act, 1961 regarding exemption of commuted pension amounts. 2. Jurisdictional challenge against the notice issued by the Commissioner of Income-tax, Bangalore. Detailed Analysis: 1. The petitioner, a retired commissioned officer of the Indian Army, exercised an option to receive a lump sum amount in lieu of the pro rata service pension as per a communication dated September 12, 1974. The issue arose when the Commissioner of Income-tax sought to revise the assessment, claiming that only 1/3rd of the commuted pension amount was exempt from tax under Section 10(10A) of the Income Tax Act, 1961. The petitioner contended that the entire lump sum payment should be excluded from the computation of total income under the said provision. The court analyzed the scheme applicable to the petitioner, which allowed for a lump sum payment in lieu of the full pension, distinct from the Civil Pension (Commutation) Rules. It was held that the petitioner was entitled to the exclusion of the entire amount from income tax computation under Section 10(10A) as per the specific scheme applicable to him. 2. The jurisdictional challenge against the notice issued by the Commissioner of Income-tax was based on the contention that the notice was defective and issued on general departmental instructions without proper consideration of the petitioner's specific scheme. The court acknowledged the technicality of the defect in the notice but emphasized that the main contention regarding the exclusion of the entire commuted pension amount under Section 10(10A) was valid. It held that the notice was erroneous in seeking to limit the exemption to 1/3rd of the commuted pension amount. The court deemed it appropriate to interfere at this stage due to the jurisdictional nature of the matter and the petitioner's entitlement to the full exemption under Section 10(10A). In conclusion, the court ruled in favor of the petitioner, quashing the notice issued by the Commissioner of Income-tax, Bangalore, and affirming the petitioner's right to exclude the entire lump sum payment received in commutation of pension from income tax computation under Section 10(10A) of the Income Tax Act, 1961.
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