COL JASWINDER PAL SINGH (RETD.) vs. PRINCIPAL COMMISSIONER OF INCOME TAX-1, CHANDIGARH

Facts

The petitioner, a retired Indian Army officer, sought a refund of income tax on his disability pension (service and disability elements) for past years. He was commissioned in 1975 and retired in 2008. His disability pension was released retrospectively from his retirement date, effective December 1, 2008, following an order by the Armed Forces Tribunal. Arrears were paid in July 2018. Relying on a CBDT circular dated July 2, 2001, he applied for revised returns for financial years 2008-09 to 2016-17, claiming a refund of Rs. 8,30,244. His claim was rejected by the respondent, Principal Commissioner of Income Tax-1, through orders dated January 21, 2021, December 1, 2021, and February 7, 2022. The respondent cited CBDT Circulars No. 09/2015 and 13/2019, which disallowed condonation of delay in filing ITRs. The petitioner filed a writ petition challenging these rejections.

Held

The High Court allowed the writ petition, directing the respondent to refund the income tax paid by the petitioner for the relevant years along with interest at 9% per annum within one month. The Court reasoned that the petitioner's disability pension, granted retrospectively, should be treated as tax-exempt in line with CBDT Circular dated 02.07.2001 and the judgments of the Delhi and Madhya Pradesh High Courts. The Court found that the respondent's reliance on Circular No. 13/2019 was misplaced, especially since this circular was subject to a status quo order by the Supreme Court in the case of Pradeep Mathur. The Court emphasized that the petitioner's disability pension falls under the exemption criteria as per earlier circulars and judicial pronouncements. The Court also clarified that if the payment is not made within the stipulated period, interest at 18% per annum would be applicable from the date of entitlement until actual payment, referencing the Madhya Pradesh High Court judgment. Costs of Rs. 1 lac were also awarded to the petitioner. The Court did not explicitly leave any issue undecided.

Key Issues

1. Whether the petitioner is entitled to income tax exemption on his disability pension (service and disability elements) for the financial years 2008-09 to 2016-17, considering CBDT Circular dated 02.07.2001 and the fact that his disability pension was granted retrospectively. Assessee's Contention: The petitioner argues that as per CBDT Circular dated 02.07.2001, his entire disability pension is exempt from income tax. He also relies on the Delhi High Court judgment in Mahavir Singh Narwal vs. Union of India and another, and the Madhya Pradesh High Court judgment in Madan Gopal Singh Nagi vs. Commissioner of Income Tax II, which affirmed the tax-exempt status of disability pension. He contends that Circular No. 13/2019, which the respondent relies on, has been stayed by the Supreme Court and was issued after his application for revised returns. Revenue's Contention: The respondent argues that the delay in filing the Income Tax Returns (ITRs) cannot be condoned as per Board's Circular No. 09/2015 and Circular No. 13/2019. They state that the petitioner's case can only be considered after a decision in the Supreme Court case of Pradeep Mathur and others vs. Union of India and others, which concerns the challenge to Circular No. 13/2019. The respondent also noted that the petitioner's application was made 10 months before Circular No. 13/2019 was issued.