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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 ..... 0/- for which there is already relief granted to the assessee considering the present provision read with the notification. Based on these observations we are of the view that if the limit fixed in 2002 revised, consequent to the directions or the proceedings before the Hon ble Delhi High Court or the CBDT revise the limit then in that situation the assessee may approach the jurisdictional AO for taking the benefit of increase in limit but presently considering the fact that in the absence of the relevant notification benefit cannot be granted to the assessee more than Rs. 3 lacs. Based on these observations the appeal of the assessee is disposed off. - ITA No. 385/JP/2022 - - - Dated:- 10-5-2023 - Shri Sandeep Gosain, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Sh. Vishal Gupta (CA) For the Revenue : Smt Monisha Choudhary (Addl. CIT) ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 29/08/2022 [here in after (NFAC)] for assessment year 2020-21 which in turn arise from the order dated 19.10.2021 passed under section 143(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the intimation u/s 143(1) dated 19.10.2021 was received by him in which a tax demand of Rs. 140170 was raised vide intimation u/s 143(1) dated 19.10 2021 after allowing exemption to the extent of Rs. 300000 and adding balance amount of LE in income Rs. 897796. In the instant appeal, the appellant has relied upon the provisions of Section 10(10AA) of the Income Tax Act and therefore has disputed the action of the CPC in restricting the exemption of Rs. 3,00,000/-. 4.2 The order of the CPC u/s 154 has been seen and the contention of the appellant has been considered. As per the provisions of Section 10(10AA) of the Income Tax Act, for private employees as is the case in this appeal, the exemption on account of Leave Encashment Income is applicable to the lowest of the below amount.- i. Rs. 3,00,000/- ii. Actual Leave Encashment amount ill. Average Salary (Basic Salary+DA) of the last 10 months before the date of retirement. iv. Cash equivalent of pending Leave days. 4.3 The limit of exemption u/s10(10AA) of private sector employees who retire, whether on superannuation or otherwise, after 01.04.1998 has been fixed at Rs 3.00.000/- by notification no. S.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) who passed his order on 29.08.2022 rejecting the claim of full exemption of the assessee. The order was a non speaking order where no reason as such was offered for non acceptance of interpretation of law of assessee. We draw the attention of Ld. members to Para 4.2 of the order where the said decision has been made. The copy of Form 35 filed by the assessee as well as reply furnished by the assessee to Ld. CIT(Appeals) are enclosed as Page No s 19-28 page No s 29-31 of paper book respectively. Further, a copy of order of the Ld. CIT(Appeals) is attached as Page No s 32-35 of paper book submitted by us. Aggrieved by the said order of Ld. CIT(Appeals), the assessee is in appeal before the H ble ITAT, Jaipur bench. Now we hereby submit ground wise reply as under: Ground No. 1 On the facts and circumstances of the case, The Ld. CIT(A) has grossly erred in law and facts by approving the action of CPC of restricting the exempted income claimed by the assessee under Section 10(10AA) to Rs 300000.00 on the basis of erroneous interpretation of statute. Such an action of Ld. CIT(Appeals) is unjust and against the provisions of the law. It is hereby prayed for allowing full exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We now draw the attention of the H ble bench to portion of the sub section (ii) marked in bold which are again reproduced hereunder: 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] Thus, it can be clearly seen that the intention of legislature was very clear while drafting the above Section. Whether a strict interpretation is given or a liberal one i.e whether the language of the law is read or the intention behind is considered, in both the cases, it can be seen that the limit for persons other than government employees have to be decided on the basis of limit applicable in this behalf to the employees of Central government. To have a clear understanding of intent of law, Para 25 of memorandum explaining the provisions in the Finance Bill, 1982 by which this section came into existence is reproduced hereunder: Exemption of amounts received by way of encashment of unutilised earned leave by retiring employees - Section 10(10AA) Under the existing provisions of the Income-tax Act, any amount r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the corresponding entry in column (3) of the said Table : TABLE Sl. Amount Period of retirement No. (Rs.) (1) (2) (3) 1. 73,400 1st July, 1986 to 31st December, 1986. 2. 75,600 1st January, 1987 to 30th June, 1987. 3. 77,760 1st July, 1987 to 31st December, 1987. 4. 79,920 1st January, 1988 onwards. By this notification, limit for the purpose of this sub section were defined for various periods. This notification was succeeded by notification dated 26.03.1996 and then by notification dated 27.11.1998 increasing the said limits from time to time. The language used by the said notifications (marked in bold above) was same in all these notifications and they itself exhibit the intention of law which is a self admitted fact by the CBDT and require no more comprehension. The latest notification dated 31.05.2002 extended the said limit to Rs 300000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the board by the legislation. We also draw attention of the H ble bench to the DTL(Amendment) Act, 1987, the relevant extracts of which are reproduced hereunder. The relevant portion which we want to bring to notice of the Ld. Members are made bold with bigger fonts. It has been clearly indicated in said amendment act that the only purpose of keeping the requirement of notification in law was to avoid frequent changes in law as the salary of government employees keep changing. It also proves our point that the requirement of issuing notification was not discretionary but rather contingent upon increase in salary of government employees and when that increase is witnessed, it becomes duty of CBDT to issue the requisite notification increasing the limit. DTL (Amendment) Act, 1987-IV - Circular No. 551, Dated 23-1-1990 Amendment of provisions relating to exemption of the amount received by an employee as cash equivalent of leave salary to his credit on his retirement [clause (10AA)] 3.16 Clause (10AA), which exempts from tax the cash equivalent of leave salary in respect of earned leave to the credit of an employee, received by him at the time of retirement covers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the definition is now given in the Explanation at the end of clause (10) for purposes of both the clauses (10) and (10AA) [refer para 3.14 ante]. 3.20 Since the amendments to clause (10AA) were necessitated as a result of the recommendations of the Fourth Pay Commission in the case of Central Government employees, which became effective from 1-7-1986, the said amendments have also been made effective retrospectively from 1-7-1986. We further reproduce the relevant extracts of Finance Act, 1999 in support of our contention that the basis of increase in limit has always been the revision by various pay commissions. Finance Act, 1999 - Circular No. 779, Dated 14-9-1999 Exemption limit of leave salary of non-Government employees revised to salary of ten months 6.1 The amount of encashment of earned leave up to a period of eight months was exempt under section 10(10AA) of the Income-tax Act. Pursuant to recommendations of the Fifth Pay Commission, the limit has been raised to leave encashment of ten months in cases of employees of the Central or State Government. 6.2 With a view to bring parity for non-Government employees, the Act enhances the existing exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m and second was to issue notification specifying increased periodical limits as were issued till 2002. The first contention was rejected by the H ble court but in respect of second contention, following observations were made: 8. We are however of the, prima facie, view that the grievances of the petitioner with regard to exemption limit under Clause (ii) of Section 10 (10AA) not being raised since 1998, appears to be justified. This is so because over the decades, the pay-scales admissible to government servants, and even employees of the Public Sector Undertaking and Nationalized Banks and all others have been upwardly revised, keeping in view, the financial growth in the country as well as on account of rising inflation. The last drawn salaries have increased manifold since time and notification issued under Clause (ii) of Section 10 (10AA) was lastly issued, as taken note of hereinabove, on 31.05.2002. We therefore, issue notice to the respondents limited to this aspect. It can be seen that even in above observations of H ble High Court, the contention of the assessee has been accepted. 5.. Further, in apprehension of the claim of department that may arise that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the employees who retire or become incapacitated prior to such retirement or die on or after the 29th day of March, 2018 or whose employment is terminated on or after the said date Notification : No. SO 1213(E), dated 8-3-2019. Notification dated 08.03.2019 has been issued superseding the notification dated 11.06.2010 and the limit has been increased from 10 to 20 lakhs. Also notification dated 11.06.2010 superseded the notification dated 20.01.1999 and increased the limit from 3.5 lacs. It can be noted by my lords that the genesis of both Section 10(10) and 10(10AA) is same, that is, drawing distinction between govt. and non govt. employees yet keeping the exemption same. The logic of keeping the exemptions as notification oriented has already been explained by us. Further, it can be seen in this section also that the notifications have been issued from time to time though the language has been used as may . We draw the attention of the H ble members to the following decisions of the higher courts where it has been held that when may has to be treated as shall and vice versa to attain the objectives behind the law: a. We rely on the judgement of H ble Apex C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant statute merely conferred a power by laying down that it shall be lawful to issue a commission. The Courts of Queens Bench and of Appeal in England had differed on the question whether a mandamus from the Court could go to the Bishop commanding him to. issue a commission for the purpose of making the enquiry. The House of Lords held that the power to issue the commission was not coupled with a duty to exercise it in every case although there may be cases where duties towards members of the public to exercise a power may also be coupled with a duty to exercise it in a particular way on fulfilment of certain specified conditions. The statute considered there had not specified those conditions. Hence, it was a bare power to issue or not to issue the commission. Lord Blackburn said: (at p. 241 ): I do not think the words 'it shall be lawful' are in themselves ambiguous at all. They are apt words to express that a power is given; and as, prima facie, the donee of a power may either exercise it or leave it unused, it is not inaccurate to say that, prima facie, they are equivalent to saying that the donee may do it; but if the object for which the power is conferred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he word may itself must be equated with shall but because judicial power has necessarily to be exercised justly, properly, and reasonably to enforce the principle that fights created must be enforced. In the case before us, the only right which could be said to have been created is the right to get speedier adjudication from the Court where the winding up proceeding is taking place. That is the object of the provisions. On facts disclosed in this case, we find that the application seems to have been made with the object of delaying deci- sions on claims made. In such a case, there could be no doubt that the application should be rejected outright as the learned Company Judge did. Secondly, an attempt was made to urge that the power to grant or not to grant or to grant a stay upon certain condi- tions, assuming the power to be discretionary, is to be exercised by the Courts in which that discretion is vested, this Court should not interfere with the exercise of discre- tion by the Division Bench to which an appeal from the order of the Company Judge lay. The effective answer to this contention is that, where the learned Company Judge had himself exercised his discretio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, would not mean that the intention of the Legislature was only to show that the provisions under Section 27 of the Act was directory but not mandatory. 16. In other words, taking into consideration the object of the Act and the intention of the Legislature and in view of the discussions made herein earlier, we are of the view that the word may occurring in Section 27 of the Act must be construed as a mandatory provision and not a directory provision as the word may , in our view, was used by the Legislature to mean that the procedure given in those provisions must be strictly followed as the special protection has been given to the tenant from eviction. Such a cannon of construction is certainly warranted because otherwise intention of the Legislature would be defeated and the class of landlords, for whom also, the beneficial provisions have been made for recovery of possession from the tenants on certain grounds, will stand deprived of them. c. We also rely on decision of H ble Apex court in the case of Mohan Singh and Ors. Vs. International Airport Authority of India and Ors. 1997 (9) SCC 132 where the Court while dealing with the intention of the Legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although the problem of mandatory and directory legislation is a hazard to all governmental activity, it is peculiarly hazardous to administrative agencies because the validity of their action depends upon exercise of authority in accordance with their charter of existence the statute. If the directions of the statute are mandatory, then strict compliance with the statutory terms is essential to the validity of administrative action. But if the language of the statute is directory only, the variation from its direction does not invalidate the administrative action. Conversely, if the statutory direction is discretionary only, it may not provide an adequate standard for legislative action and the delegation. In Crawford on the Construction of Statutes at page 516, it is stated that: The question as to whether a statute is mandatory or directory depends upon the intent of the Legislature and not upon the language in which the intent is clothed. The meaning and intention of the Legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Hon ble Delhi High Court has issued a notice to the Union of India in the case of Kamal Kumar Kalia Ors. Vs. Union of India Ors in WP(C) 11846/2019 dated 08.11.2019 wherein the court has given following directions :- 8. We are however of the, prima facie, view that the grievances of the petitioner with regard to exemption limit under Clause (ii) of Section 10 (10AA) not being raised since 1998, appears to be justified. This is so because over the decades, the pay-scales admissible to government servants, and even employees of the Public Sector Undertaking and Nationalised Banks and all others have been upwardly revised, keeping in view, the financial growth in the country as well as on account of rising inflation. The last drawn salaries have increased manifold since time and notification issued under Clause (ii) of Section 10(10AA) was lastly issued, as taken note of hereinabove, on 31.05.2002. We therefore, issue notice to the respondents limited to this aspect. 9. Issue notice, learned counsel for the respondents accepts notice. Respondents should file counter affidavits be filed within six weeks. Rejoinder thereto, if any, be filed before the next date. 8.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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