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2023 (5) TMI 741 - HC - Income TaxRefund of the income tax for the past years on exempted income of disability pension (service element and disability element) - petitioner is a disabled officer of the Indian Army who was commissioned and retired with service pension - HELD THAT - As no explanation has been given as to why as per the Circular dated 02.07.2001 as referred to in the case of Colonel Madan Gopal Singh Nagi 2019 (3) TMI 502 - MADHYA PRADESH HIGH COURT once the disability pension was exempted from income tax then why this benefit has not been given to the petitioner. More so, the Board's Circular No. 13/2019 dated 24.06.2019 has been challenged by the disabled soldiers which has been stayed by the Hon'ble Supreme Court. Since the parties were directed to maintain status quo, which means that no recovery of income tax could be effected from the Army officer. Another aspect which required to be considered is that the Delhi High Court in Mahavir Singh Narwal vs. Union of India and another 2004 (5) TMI 622 - DELHI HIGH COURT has already examined Rule 173 of the Disability Pension which has not been amended till date. This writ petition is allowed and the amount of income tax paid by the petitioner for the relevant years be refunded to him alongwith interest @ 9% p.a. within a period of one month from the date of receipt of certified copy of this order alongwith costs of Rs.1 lac. Thereafter, compliance report of the order be sent to this Court by the concerned authority. If the payment is not made within the stipulated period then interest @ 18% p.a. from the date of entitlement till the amount actually paid to the petitioner shall be given as per the judgment passed in Madan Gopal Singh Nagi vs. Commissioner of Income Tax II 2019 (3) TMI 502 - MADHYA PRADESH HIGH COURT
Issues Involved:
1. Quashing of orders rejecting the refund claim for income tax on disability pension. 2. Applicability of CBDT Circulars regarding tax exemption on disability pension. 3. Delay in filing revised income tax returns. 4. Compliance with the Supreme Court's status quo order. Summary: Issue 1: Quashing of Orders Rejecting Refund Claim The petitioner sought quashing of orders dated 21.01.2021, 01.12.2021, and 07.02.2022 rejecting his claim for a refund of income tax on his disability pension. The petitioner, a disabled officer of the Indian Army, was granted disability pension retrospectively from 01.12.2008, and he applied for a refund based on CBDT Circular No. 2/2001, which exempts disability pension from income tax. Despite this, his claim was rejected, leading to the present writ petition. Issue 2: Applicability of CBDT Circulars The petitioner argued that according to CBDT Circular No. 2/2001, his disability pension should be tax-exempt. The respondent, however, cited Circular No. 13/2019, which was challenged and stayed by the Supreme Court. The Court noted that the petitioner's application was filed before the issuance of Circular No. 13/2019, and thus, the exemption should apply. Issue 3: Delay in Filing Revised Income Tax Returns The respondent rejected the petitioner's claim based on the delay in filing revised returns, as per Circular No. 09/2015 and Circular No. 13/2019. However, the Court observed that the petitioner had filed revised returns within the stipulated time after receiving arrears of disability pension, and the delay should be condoned. Issue 4: Compliance with Supreme Court's Status Quo Order The Court highlighted that the Supreme Court had directed parties to maintain status quo regarding Circular No. 13/2019. Thus, no recovery of income tax on disability pension should have been made. The Court referenced judgments from the Delhi High Court and Madhya Pradesh High Court, which supported the tax exemption on disability pension and ordered refunds with interest. Conclusion: The writ petition was allowed, directing the refund of the income tax paid by the petitioner along with 9% interest per annum within one month. If not paid within the stipulated period, the interest rate would increase to 18% per annum. The Court also awarded costs of Rs. 1 lakh to the petitioner for the undue hardship faced.
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