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TMI Blog2023 (5) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant craves the leave to add, alter, substitute and withdraw any or all ground of appeals at the time of or before the date of hearing." 3. Succinctly, the fact as culled out from the records is that the assessee retired on 30.09.2019 from National Insurance Co. Ltd. which is a company wholly owned by central government. Assessee received Rs. 11,97,796 as earned leave encashment of 240 days. Assessee filed Income tax return on 14.09.2020 for assessment year 2020-21 and claimed exemption for leave encashment received in full as per provision of section 10(10AA)(ii). In the proceeding before CPC the assessee contended that leave encashment amount received at the time of retirement is exempt from tax to the extent of eligibility of leave encashment exemption to the highest paid employee in the central government and at present it is Rs. 29.25 lacs. The assessee further contended that he has received lessor amount and claimed exemption on the entire amount of leave encashment received. After considering the reply of the assessee CPC allowed exemption to the extent of Rs. 3,00,000/- and balance amount of leave encashment added in the income of the assessee to the extent of Rs. 8,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee as reiterated here in above para 2. To support the various grounds so raised by the assessee, the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below; "We have submitted a paper book separately. The paper book so submitted is prayed for being considered as part of this submission. With this prayer, we start our reply which is as under: Brief Facts of the case are as under: The assessee is an individual and was serving with National Insurance Company Limited which is a company wholly owned by the Central Government. The assessee filed his return of income on 14.09.2020 where certain amount received by him at the time of retirement were claimed as exempt in accordance with law. Same included amount of Rs 1197796.00 received as Earned Leave Encashment for 240 days which was claimed as exempt under Section 10(10AA). The copy of acknowledgement of return of income filed by the assessee is enclosed as a part of paper book vide Page No. 1. The CPC, Bengaluru issued a notice dated 30.08.2021 proposing disallowance of exemption claimed under section 10(10AA) which was in excess Rs 300000.00. Same was replied by assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit 15at the time of his retirement 16[whether] on superannuation 15or otherwise as does not exceed 17[ten] months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement 16[whether] on superannuation or otherwise, 18[subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit19 applicable in this behalf to the employees of that Government] : Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause 20[shall not exceed the limit so specified] : Provided further that where any such payment or payments was or were received in any one or more earlier previous years also and the whole or any part of the amount of such payment or payments was or were not included in the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of service. The exemption will be limited to the amount payable for such unutilised leave on the basis of the average salary of the employee for 6 months or Rs. 30,000, whichever is less. In the case of employees retiring before January 1, 1982, the monetary ceiling limit will be Rs. 25,500. The average salary shall be determined on the basis of the salary drawn for the 10 immediately preceding months. In relation to non-Government employees, who retire on superannuation or otherwise after December 31, 1981, the Central Government is being empowered by notification in the Official Gazette, to raise the aforesaid monetary ceiling of Rs. 30,000 keeping in view the maximum amount which will qualify for exemption in the case of Government servants. 2.. Now, we want to discuss the mode in which such notification was required to be issued and in fact have been issued in the past by the CBDT. For same, kindly refer to Notification No. S.O 553 E, dated 08.06.1988 where the wordings used are as follows: Notification: S.O.553(E) Section(s) Referred: 10 ,10(10AA) ,10(10AA)(ii) Statute: INCOME TAX Date of Issue: 8/6/1988 In exercise of the powers conferred by sub-clause (ii) of claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Kindly refer to para 3 and 4 of the said office note on Page 39 of paper book where it has been clearly mentioned that the period of 8 months was increased to 10 months as the same was also enhanced for central and State government employees. Kindly also refer Page 44 of paper book where in Para 3 to 5, the manner of fixing limit of Rs 300000.00 has been discussed which is same as is mentioned here in our submissions. As the then salary of maximum basic pay admissible to a government servant was Rs 30000.00, the limit of Rs 300000.00 was fixed (Rs 30000.00 * 10 months) . At present, that is the period when assessee retired from his service, the Basic Pay of highest paid employee in Government who happens to be Cabinet Secretary is Rs 2.50 Lacs per month and for 10 months same is worked out at Rs 25 lacs. As an evidence, we enclose vide Page No. 46-56 of paper book the copy of resolution of Ministry of Finance where it can be clearly seen on Page 49 of paper book that the salary of highest paid government employee if Rs 2.50 lakhs. By perusal of the above office note as well as the past notifications, it can be clearly seen that the basis of amount has always been as per the inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endations of the Fourth Pay Commission. To achieve this objective and also to rationalize the provisions, the Amending Act, 1987 has made the following amendments in the said sub-clause (ii) :- (i) The maximum amount that would now be exempt is the equivalent of 8 months' leave salary instead of six months' leave salary as was the case under the old provisions. (ii) The maximum limit of exemption, namely, Rs. 30,000, is not specified in the sub-clause. Instead, it is now provided that the limit may be specified by the Central Government by way of a notification in the Official Gazette having regard to the limit applicable to the Central Government employees. This would avoid frequent changes in the Income-tax Act for the same reasons as explained in the case of amendment of clause (10) relating to gratuities [refer para 3.11 ante]. 3.19 The old clause (10AA) also had four provisos similar to the four provisos in clause (10) relating to the gratuities. The Amending Act, 1987 has made consequential changes in the first and second provisos and has omitted the third and fourth provisos of clause (10AA) for the same reasons as was done in the case of four provisos of claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing to increase this limit to 25 lakh" We further submit that as discussed above, the extraordinary increase in limit from Rs 300000.00 to Rs 2500000.00 is not extraneous but based on certain facts and figures and considering the increase in salary of Govt. employees from time to time. We again draw the attention of the H'ble members to the fact that as the maximum salary at present of Central govt. employee is Rs 2.5 Lakhs, liit has been proposed to Rs 25 Lakhs. We thus pray the H'ble bench that due to the inaction of CBDT, burden cannot be imposed upon the assessee and other non government employees. The intention of the legislation was clear to maintain parity for exemption both for government as well as non government employees and also simultaneously put a check on the private employers to avoid misuse of this exemption by making salary structures in such a way so as to enable their employees to claim any superfluous amount as exemption 4.. The matter is also sub judice with H'ble Delhi High Court in the case of Kamal Kumar Kalia & Others vs Union of India & Others, W.P (C ) 11846/2019. The interim decision dated 08.11.2019 is enclosed as a part of paper book vide page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month's salary for each year of completed service, 3[calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government]: Latest Notification dated 08.03.2019 for this section is reproduced below: Limits specified under section 10(10)(iii)- In exercise of the powers conferred by subclause (iii) of clause (10) of section 10 of the Income-tax Act, 1961, and in supersession of Ministry of Finance, Department of Revenue, notification number S.O. 141(E), dated the 11th June, 2010, except as respects things done or omitted to be done before such supersession, the Central Government, having regard to the maximum amount of any gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilment of certain legally prescribed conditions, to be shown by evi- dence, a particular kind of order must be made. If the statute leaves no room for discretion the power has to be exercised in the manner indicated by the other legal provisions which provide the legal context. Even then the facts must establish that the legal conditions are fulfilled: A power is exercised even when the Court rejects an applica- tion to exercise it in the particular way in which the applicant desires it to be exercised. Where the power is wide enough to cover both an acceptance and a refusal of an application for its exercise, depending upon facts, it is directory or discretionary. It is not the conferment of a power which the word "may" indicates that annexes any obligation to its exercise but the legal and factual context of it. This, as we understand it, was the principal laid down in the case cited before us: Frederic. Guilder Julius v. The Right Rev. The Lord Bishop of Oxford; The Rev. Thomas Thellusson Carter. Dr. Julius, in the case mentioned above, had made an application to the Bishop of Oxford against the Rector of a parish, asking the Bishop to issue a commission under the Church ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power conferred becomes annexed with a duty to exercise it in that manner. This is the principle we deduce from the cases of this Court cited before us: Bhaiya Punjalal Bhagwandin v. (1) 5 A.C. 214. Dave Bhagwatprasad Prabhuprasad,(1) State of Uttar Pradesh v. Jogendra Singh,(2) Sardar Govindrao & Ors. v. State of M.P.,(3)) Shri A. C.Aggarwal. Sub-Divisional Magistrate, Delhi & Anr, v. Smt. Ram Kali etc.,(4) Bashira v. State of U.P.,(5) and Prakash Chand Agarwal & Ors. v. M/s. Hindustan Steel Ltd.(6) In the statutory provision under consideration now before us the power to stay a proceeding is not annexed with the obligation to necessarily stay on proof of certain conditions although there are conditions prescribed for the making of the application for stay and the period during which the power to stay can be exercised. The question whether it should, on the facts of a particular case, be exercised or not 'will have to be examined and then decided by the Court to which the application is made. If the applicant can make out, on facts, that the objects of the power conferred by ss. 442 and 446 of the Act, can only be carried out by a stay order, it could perhaps be urged that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erference under Art. 136 of the Constitution are not confined to those in respect of final orders, although finality of an order is a test which this Court generally applies in considering whether it should interfere under Art. 136 of the Constitution with it. We think that we have indicated sufficiently why, despite the fact that an order staying proceedings under s. 442(b) of the Act may not, strictly speaking, be final, yet, a question of general principle of wide application, as to the circumstances in which an apparently discretionary power may become annexed with a duty to exercise it in a particular way, having arisen here, we consider this to be a fit case for interference under Article 136 of the Constitution. Consequently, we allow this appeal and set aside the judgment and order of the Division Bench and restore that of the learned Company Judge. The parties will bear their own costs." b. We further refer to decision of H'ble Apex court in the case of Sarla Goel & Ors vs Kishan Chand, Civil Appeal No. 4162/2009 where the H'ble court held as under: "It is well settled that whether the word "may" shall be used as "shall", would depend upon the intention of the Legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consideration of policy at times may, however, create exception showing that Legislature did not intend a remedy (generality) to be exclusive. Words are the skin of the language. The language is the medium of expressing the intention and the object that particular provision or the Act seeks the achieve. Therefore, it is necessary to ascertain the intention. The word "shall" is not always decisive. Regard must be had to the context, subject matter and object of the statutory provision in question in determining whether the same is mandatory or directory. No universal principle of law could be laid in that behalf as to whether a particular provision or enactment shall be considered mandatory or directory. It is the duty of Court to try to get at the real intention of the Legislature by carefully analysing the whole scope of the statute or section or a phrase under Consideration. As stated earlier, the question as to whether the statute is mandatory or directory depends upon the intent of the Legislature and not always upon the language in which the intent is couched. The meaning and intention of the Legislature would govern design and purpose the Act seeks to achieve. In "Sutherla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al decision in the matter (if against the assessee) as same may not be in interest of justice. Thus, the assessee prays that he must be given benefit of any future retrospective notification on the subject matter. With these submissions, we pray the H'ble bench to allow this ground of appeal raised by the assessee. Ground No. 2 That the appellant hereby craves the leave to add, alter, substitute and withdraw any or all grounds of appeals at the time of or before the date of hearing. This ground of appeal does not require any submission. With the above submissions, we hereby pray the Ld. Bench to allow the appeal of the assessee." 6. In addition to the above detailed written submission the ld. AR of the assessee also submitted that in the recent budget speech Hon'ble Finance Minister indicated that for increase in the limit and the related notification is awaited. The ld. AR thus relying the Delhi HC judgment issuing notice to the Union of India prayed that the relief be granted to the assessee. 7. The ld. DR is heard who has relied on the findings of the lower authorities and notification dated 31.05.2002. 8. We have heard the rival contentions and perused the material ..... 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