The Patna High Court observed that differentiation made by State between Central and State Government employees under Section 10 (10 AA) of the Income Tax Act, 1961 is not discriminatory and not violative of Article 14 of the Constitution of India.
According to the writ petition filed prior to his retirement, he made a case that once retired, he was entitled to Rs. 6,70,000/- but after deduction of income tax he will be getting only a sum of Rs. 4,70,000/- approximately as rest of the amount will be liable to tax. However, had he been in the State or Central Government Services, no deduction on account of income tax would have been made from the leave salary payable to the petitioner at the time of his retirement and he would have been entitled to receive the entire sum.
According to the petitioner, it is only because of the operation of Section 10(10AA) of the Income Tax Act which discriminates between the similarly placed group of employees that he would lose so much money under Section 10 (10AA) of the Income Tax Act.
The contention of the petitioner is that the impugned section 10(10AA) of the Income Tax Act does not place any cap on the period of leave and amount of leave salary which will be out of income tax net at the time of retirement in the case of government employees whether they are in Central or State Services, whereas in the case of employees of other establishments, the period of leave is capped at 10 months and the maximum amount exempted from income tax is subject to such limit as the Central Government may notify in the Official Gazette the same being in the year 2017 to be Rs.3.00 lakh which means that any amount which is in excess of Rs.3.00 lakh will be liable to tax.
The Apex Court has recently observed that if there is equality and uniformity in each group, the law will not become discriminatory, though due to some fortuitous circumstance arising out of peculiar situation, some included in a class get an advantage over others so long as they are not singled out for special treatment
A Division Bench of Chief Justice K. Vinod Chandran and Justice Rajiv Roy observed that “The legislature must have the freedom to select and classify persons, properties and income which it would tax and/or not tax. Thus, the differentiation made by the State between the employees of the Central and State Governments on the one hand and the other employees on the other in Section 10 (10 AA) of ‘the Act’ in our view is neither discriminating nor violative of the Article 14 of the Constitution of India.”
“We are thus of the view that classification made in the Section 10 (10AA) of ‘the Act’ has withstood the judicial scrutiny again and again and there is no need to give a re-look to it. The petitioner, a retired employee of the State Bank of India cannot claim parity with the employees of the Central and State Government and in that background, the deductions so made cannot be interfered with” the Court noted.
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