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Issues:
Taxability of terminal benefit under Central Civil Services (Pension) Rules, 1972; Interpretation of exemption under s. 10(10A)(i) of the Income Tax Act, 1961; Applicability of r. 37A in determining tax exemption for terminal benefit. Detailed Analysis: The judgment addressed the issue of the taxability of the terminal benefit payable to a former civil servant under cl. (b) of sub-r. (1) of r. 37A of the Central Civil Services (Pension) Rules, 1972. The petitioner, upon absorption in the Oil & Natural Gas Commission, was entitled to receive a lump-sum amount not exceeding the commuted value of 1/3rd of his pension under cl. (a) of the said rule, and a terminal benefit equal to twice that amount under cl. (b). The dispute arose when tax was sought to be deducted at the source for the terminal benefit, leading to the petition to enforce payment without deduction, claiming exemption under s. 10(10A)(i) of the Income Tax Act, 1961. The court examined the provisions of r. 37A and the intention behind its incorporation to introduce uniformity in tax exemption. While the amount under cl. (a) was exempt as a payment in commutation of pension under the Commutation Rules, the petitioner argued that the terminal benefit under cl. (b) should also be exempt under the latter part of s. 10(10A)(i) as a payment in commutation of pension under a similar scheme. However, the court held that the terminal benefit did not qualify for exemption under s. 10(10A)(i) as it did not meet the condition that the similar scheme must apply to members of the civil services of the Union or holders of posts not covered by the Commutation Rules. The judgment further addressed the petitioner's broader contentions challenging the taxation policy regarding pension benefits and terminal benefits, criticizing it as unjust and unfair. The court acknowledged the criticism but noted that such policy matters are beyond its purview and fall under the exclusive authority of the bodies determining taxation policy. The court expressed hope for future considerations in tax policy reorientation but ultimately dismissed the petition, emphasizing that it cannot provide relief based on policy content. In conclusion, the court dismissed the petition, highlighting that the matters raised regarding taxation policy are not justiciable and are within the realm of authorities responsible for tax policy decisions. The judgment emphasized the limitations of the court in addressing policy-related issues and expressed a hopeful outlook for potential future considerations in tax policy reorientation.
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