DAVIS P J., vs. UNION OF INDIA

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH MONDAY, THE 22ND DAY OF JANUARY 2024 / 2ND MAGHA, 1945 WP(C) NO. 5790 OF 2022 PETITIONER/S: 1 DAVIS P J., AGED 63 YEARS S/O. JOSEPH, RESIDING AT PULICKAN HOUSE, SANTHOSH STREET, KURIACHIRA, TRICHURE 680 006. 2 JOSE N.J., AGED 63 YEARS S/O. LONAPPAN, RESIDING AT NEELANKAVIL HOUSE, TRICHURE 680 001. 3 ANTONY MOOKAN, AGED 63 YEARS S/O. JOSE, RESIDING AT MOOKEN HOUSE, OLLUR, TRICHURE 680 306. 4 SUMA G GEORGE , AGED 63 YEARS D/O. GEORGE, RESIDING AT VALAVI HOUSE, CHALAKUDY TRICHURE 680 307. 5 ANET KORATHU, AGED 62 YEARS D/O. GEORGE, RESIDING AT KADAMPATTUPARAMBIL ELIUJIPRA, TRICHURE 680 721. BY ADVS. C.S.AJITH PRAKASH T.K.DEVARAJAN FRANKLIN ARACKAL PAUL C THOMAS BABU M. ANCY THANKACHAN NIDHIN RAJ VETTIKKADAN HAARIS MOOSA

WP(C) NO. 5790 OF 2022 2 RESPONDENT/S: 1 UNION OF INDIA REPRESENTED BY THE SECRETARY TO GOVERNMENT OF INDIA, MINISTRY OF FINANCE, JEEVAN DEEP BUILDING, SANSAD MARG, NEW DELHI 110001. 2 THE CHAIRMAN, CENTRAL BOARD OF DIRECT TAXES, NORTH BLOCK, SECRETARIAT BUILDING, NEW DELHI 110001. 3 THE PRINCIPL CHIEF COMMISSIONER OF INCOME TAX, INCOME TAX DEPARTMENT, GOVERNMENT OF INDIA, 356, C R BUILDING, I S ESTATE, NEW DELHI 110002. 4 CHIEF COMMISSIONER OF INCOME TAX, INCOME TAX DEPARTMENT, GOVERNMENT OF INDIA, CENTRAL REVENUE BUILDING, I.S. PRESS ROAD, ERNAKULAM 682 018. 5 THE SOUTH INDIAN BANK LIMITED, SIB HOUSE T. B. ROAD, P B NO. 28, TRICHURE 680 001, REPRESENTED BY ITS MANAGING DIRECTOR. BY ADV SMT.VANDANA P., CGC; SRI.CHRISTOPHER ABRAHAM, SC FOR R2-R4; SRI.K.K.JOHN FOR R5 THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C) NO. 5790 OF 2022 3 J U D G M E N T Heard the learned counsel appearing for the petitioners and also the respective learned counsel appearing for the respondents. 2. The petitioners are retired employees of the 5th respondent, a Scheduled Bank. All the petitioners retired before 01.04.2023. The present writ petition has been filed mainly seeking for a writ, order or direction in the nature of mandamus commanding the respondent Authorities to review the income limit for taxing purposes on earned leave salary under Section 10AA(ii) of the Income Tax Act 1961 with retrospective effect, inasmuch as after 2002 there has been no revision of the income limit for the purposes of exemption on encashment of earned leave salary under Section 10(10AA)(ii) of the Income Tax Act. 3. Section (10AA)(ii) of the Income Tax Act on reproduction reads as under: “(10AA) (i) …… (ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than

WP(C) NO. 5790 OF 2022 4 an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement whether on superannuation or otherwise, 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: 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 subclause 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 of the assessee of such previous year or years, the amount exempt from income-tax under this sub- clause shall not exceed the limit so specified, as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years. Explanation.—For the purposes of sub-clause (ii),— the entitlement to earned leave of an employee shall not exceed thirty days for every year of actual service rendered by him as an employee of the employer from whose service he has retired;”

WP(C) NO. 5790 OF 2022 5 4. It is the prerogative of the Government to fix the limit of income of encashment of earned leave salary for the purposes of exemption from payment of income tax. Unless the Government issues the notification fixing the limit of income for earned leave salary, an employee cannot claim exemption from payment of income tax on encashment of earned leave up to 300 days. The last notification was issued on 31.05.2002, and the Government did not thereafter issue a notification despite there having been three pay revisions. The latest notification is only in 2023, wherein the upper limit has been fixed as Rs.25 lakhs, taking the highest salary of the cabinet secretary, i.e., Rs.2.5 lakhs per month. 4.1 The Government should have revised the upper limit, which was fixed under the notification of 2002 as Rs.3 lakhs taking into consideration the three pay revisions. However, the Government has not done so. The petitioners all stood retired before the latest notification, which has been issued fixing the upper limit as

WP(C) NO. 5790 OF 2022 6 Rs.25 lakhs for exemption from payment of earned leave income. The employer has also deducted the admissible tax above Rs.3 lakhs from the petitioners. At this distant point of time, this Court, considering the limitation on the power of the Court as well as the doctrine of separation of powers, cannot issue a mandamus to the respondent Authorities to revise the upper limit of the encashment of earned leave for granting exemption from payment of the income tax with retrospective effect. Issuance of notification, as provided in the provision, is in the realm of the powers of the Executive. 5. Learned Standing Counsel for the Revenue, submits that, in fact, in one of the cases, the Delhi High Court has directed the Government to consider revision of the upper limit. However, the Government has issued the notification only in the year 2023, which is applicable with effect from 01.04.2023. 6. In view thereof, the Court, though, has sympathy with the petitioners, but considering the

WP(C) NO. 5790 OF 2022 7 limitation on powers of the Court, this Court is unable to issue a writ of mandamus commanding the respondents to revise the upper limit in respect of the employees who retired before 01.04.2023. This is in the realm of policy decision, which is to be taken by the Executive. 7. Thus, the present writ petition is disposed of with liberty to the petitioners to approach the Government for the reliefs sought for in the writ petition, and the Government may take a decision on their representations. Pending interlocutory application, if any, in the present writ petition stands dismissed. Sd/- DINESH KUMAR SINGH

JUDGE jg

WP(C) NO. 5790 OF 2022 8 APPENDIX OF WP(C) 5790/2022 PETITIONER EXHIBITS Exhibit P1 A TRUE COPY OF THE RELEVANT PORTION (SECTION 10 (AA) (I) AND 10 (AA) (II) OF THE INCOME TAX ACT, 1961. Exhibit P2 A TRUE COPY OF THE NOTIFICATION NO. 123 ISSUED BY THE INCOME TAX DEPARTMENT DATED 31.05.2002. Exhibit P3 A TRUE COPY OF THE PROPOSAL ORIGINATED BY THE UNDER SECRETARY (ITA.I), OF CBDT IN 2002 FOR ENHANCING THE LIMITED TO 3 LAKHS UNDER SECTION 10 A (II), OF THE INCOME TAX ACT, 1961. Exhibit P4 A TRUE COPY OF THE NOTIFICATION NO. S. O. 553 (E) DATED 08.06.1988 ISSUED BY THE INCOME TAX DEPARTMENT. Exhibit P5 A TRUE COPY OF THE NOTIFICATION NO. S.O. 249 (E) DATED 26.03.1996 ISSUED BY THE INCOME TAX, DEPARTMENT. Exhibit P6 A TRUE COPY OF THE NOTIFICATION NO. S.O. 1015 (E) DATED 27.11.1998 ISSUED BY THE INCOME TAX DEPARTMENT. Exhibit P7 A TRUE COPY OF THE PAY SLIP OF THE IST PETITIONER ISSUED BY THE 5TH RESPONDENT AT THE TIME OF RETIREMENT. Exhibit P8 A TRUE COPY OF THE PAY SLIP OF THE 2ND PETITIONER ISSUED BY THE 5TH RESPONDENT AT THE TIME OF RETIREMENT. Exhibit P9 A TRUE COPY OF THE PAY SLIP OF THE 3RD PETITIONER ISSUED BY THE 5TH RESPONDENT AT THE TIME OF RETIREMENT.