The Tax Publishers2020 TaxPub(DT) 5260 (Mad-HC) : (2021) 430 ITR 0189 : (2021) 279 TAXMAN 0273


Section 10(10)

Section 10(10)(ii) of the Income Tax Act exempts amounts received as gratuity from the income of the assessee to the extent specified in section 4(3) of the Payment of Gratuity Act. The undoubted position is that section 4(3) of the Payment of Gratuity Act specified the limit of Rs. 10 lakhs as on the date of retirement of the Petitioner. This limit was increased to Rs. 20 lakhs by an amendment which admittedly came into force only on 29-3-2018. This notification cannot be applied retrospectively.

Exemption under section 10(10) - Limit of exemption - Applicability of increased limit from 29-3-2018 -

Assessee was an employee of the National Thermal Power Corporation (the NTPC). He worked in said organization as an Engineer (Executive Cadre) and retired from service on 28-2-2018 after serving the organization for about 33 years. Upon retirement, his gratuity was paid in two tranches of Rs. 10 lakhs each.The case of assessee was that entire gratuity amount of Rs. 20 lakhs, which was received by him, would have been exempt from income tax if he had retired on or after 29-3-2018 because amendment to section 4(3) of Payment of Gratuity Act, whereby maximum gratuity was modified as Rs. 20 lakhs, came into effect on 29-3-2018. The consequential amendment to section 10(10) of IT Act was made on 8-3-2019 with effect from 29-3-2018. If these provisions had come into effect on 1-1-2016, which was the date when the gratuity limit was raised to Rs. 20 lakhs, persons such as assessee would have the benefit of complete exemption from income tax and accordingly impugned notifications being Notification S.O. 1419 (E) and Notification S.O. 1213 (E) were unconstitutional, inasmuch as employees who retired prior to 29-3-2018 were being discriminated against. Held: Upon perusal of Notifications S.O. 1419 (E) and S.O. 1420(E), it was evident that increase in ceiling limit under Payment of Gratuity Act was with effect from 29-3-2018. Likewise, on examining Notification S.O.1213 (E), it was abundantly clear that increased exemption limit of Rs. 20 lakhs under IT Act was applicable to those who retired or died on or after 29-3-2018. Assessee did not challenge section 10(10) of IT Act or even Notification S.O. 1213 (E). Instead, he sought a declaration, whereby amendments made by Parliament with effect from 29-3-2018 should be applied with retrospective effect from 1-1-2016. While Parliament has power to legislate retrospectively, intention to legislate with retrospective effect should be expressly stipulated in the law concerned. In this case, it is expressly stated that the amendment to section 4(3) of Payment of Gratuity Act would take effect from 29-3-2018. As a corollary, increased exemption limit in IT Act was made applicable only to persons who retire on or after 29-3-2018. In the absence of a challenge to section 10(10), relief prayed for could not be granted.


FAVOUR : Against the assessee.

A.Y. : 2019-20



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