TMI Blog2024 (3) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... he Constitution of India. The distinction made between the Central and State Government employees vis-a-vis others is/are definitely a reasonable classification which having been found to be proper in various cases decided by Hon ble the Apex Court. Though we accept that a taxation law cannot claim immunity from the equality clause that finds enshrined in Article 14 of the Constitution of India and it has to pass the test, this Court is also conscious of the fact that considering the intrinsic complexity of fiscal adjustments of diverse elements, the State has wide discretion in the matter of classification for the taxation purposes. 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) in our view is neither discriminating nor violative of the Article 14 of the Constitution of India. Even in the case of Union of India and others [ 2015 (8) TMI 97 - SUPREME COURT] cited by the learned counsel for the petitioner do not come to his rescu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TICE K. VINOD CHANDRAN, AND HONOURABLE MR. JUSTICE RAJIV ROY Appearance : For the Petitioner/s : Mr. Kundan Kumar Sinha, Advocate Mr. Bipin Krishna Singh, Advocate For the Respondent/s : Dr. K.N. Singh, Senior Advocate ASG Ms. Archana Sinha, Advocate For SBI : Mr. Rakesh Kumar Singh, Advocate C.A.V. JUDGMENT (PER: HONOURABLE MR. JUSTICE RAJIV ROY) The writ petition has been preferred: for issuance of writ of mandamus and other appropriate writ(s), order(s) or direction(s) declaring that part of the Section 10(10AA) of the Income Tax Act, 1961 (henceforth for short the Act ) by operation of which a cap has been placed on exemption from income tax from the leave encashment amount at the time of retirement of the employees other than government employees, particularly as such cap has not been placed on the amount receivable as leave encashment at the time of retirement in respect of government employees, as ultra vires to the Constitution of India and remove the unconstitutional part by applying the Doctrine of Severability so that the beneficial portion of the enactment is saved, the intent of the Legislature to provide relief to the retirees in their twilight days is not frustrated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch 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 sub- clause 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; 6. The contention of the petitioner is that the impugned section 10(10AA) of the 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmits that the Hon ble Apex Court further held that: In Aashirwad Films v. Union of India and Others [(2007) 6 SCC 624] this aspect has been articulated in the following manner. (SCC PP. 628-29 paras 9-12) 9. The State undoubtedly enjoys greater latitude in the matter of a taxing statute. It may impose a tax on a class of people, whereas it may not do so in respect of the other class. 10. A taxing statute, however, as is well known, is not beyond the pale of challenge under Article 14 of the Constitution of India. 11. In Chhotabhai Jethabhai Patel Co. v. Union of India, AIR 1962 SC 1006 it was stated: (AIR p. 1021, para 37) 37. But it does not follow that every other article of Part III is inapplicable to tax laws. Leaving aside Article 31(2) that the provisions of a tax law within legislative competence could be impugned as offending Article 14 is exemplified by such decisions of this Court as Suraj Mall Mohta Co. v. A.V. Vishvanatha Sastri (AIR 1954 SC 545: (1955) 1 SCR 448) and Meenakshi Mills Ltd. v. A.V. Visvanatha Sastri (AIR 1955 SC 13: (1955) 1 SCR 787). In K.T. Moopil Nair v. State of Kerala (AIR 1961 SC 552) the Kerala Land Tax Act was struck down as unconstitutional as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10AA)(ii) of the Act . 14. Dr. K.N. Singh, learned A.S.G. submits that the State as well as the Central Government employees form distinct class and the petitioner, a Bank employee cannot equate his employment with them. Section 10 (10AA) of the Act makes reasonable discrimination and it withstood the test before the Hon ble Apex Court. 15. Learned Senior Counsel took this Court to a decision of Shri Kamal Kumar Kalia Others vs Union of India Others decided by the Delhi High Court in W.P. 11846 of 2019 which held as follows: 5. So far as the challenge to provisions of Section 10 (10AA) of the Act on the ground of discrimination is concerned, we are of the view that there is no merit therein. This is for the reason that employees of the Central Government and State Government form a distinct class and the classification is reasonable having nexus with the object sought to be achieved. The Central Government and State Government employees enjoy a status and they are governed by different terms and conditions of the employment. Reference here may be made to the decision in Roshan Lai Tandon v Union of India AIR 1967 SC 1889, wherein it was held by the Supreme Court that the legal posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and not by agreement between the parties concerned. The matter is clearly stated by Salmond and Williams on Contracts as follows: So we may find both contractual and status obligations produced by the same transaction. The one transaction may result in the creation not only of obligations defined by the parties and so pertaining to the sphere of contract but also and concurrently of obligations defined by the law itself, and so pertaining to the sphere of status. A contract of service between employer and employee, while for the most part pertaining exclusively to the sphere of contract, pertaining. also to that of status so far as the law itself has seen fit to attach to this relation compulsory incidents, such as liability to pay compensation for accidents. The extent to which the law is content to leave matters within the domain of contract to be determined by the exercise of the autonomous authority of the parties themselves, or thinks fit to bring the matter within the sphere of status by authoritatively determining for itself the contents of the relationship, is a matter depending on considerations of public policy. In such contracts as those of service the tendency in m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly over a period and does not have the financial capacity to revise or enhance the pay scale, the petitioners cannot claim any legal right to ask for a direction to the Central Government to meet the additional expenditure which may be incurred on account of revision of pay scales. It appears that prior to issuance of the office memorandum dated 12.4.1993 the Government had been providing the necessary funds for the management of public sector enterprises which had been incurring losses. After the change in economic policy introduced in the early nineties, the Government took a decision that the public sector undertakings will have to generate their own resources to meet the additional expenditure incurred on account of increase in wages and that the Government will not provide any funds for the same. Such of the public sector enterprises (government companies) which had become sick and had been referred to BIFR, were obviously running on huge losses and did not have their own resources to meet the financial liability which would have been incurred by revision of pay scales. By the office memorandum dated 19.7.1995 the Government merely reiterated its earlier stand and issued a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the classification must be founded on intelligible differentia which distinguishes persons grouped together from others who are left out of the group, and (ii) that differentia must have a rational connection with the object sought to be achieved. Article 14 does not insist upon classification, which is scientifically perfect or logically complete. A classification would be justified unless it is patently arbitrary. 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. In substantia, the differentia required is that it must be real and substantial, bearing some just and reasonable relation to the object of the legislation. 21. Learned Senior Counsel concluded by submitting that the petitioner has failed to show how Section 10 (10AA) of the Act is arbitrary and as such the writ petition deserves dismissal. 22. The counter-affidavit of the State Bank of India states that the Income Tax Act is a Central legislation and Central Government has the power to ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention put forward that the employees of Public Sector Undertakings and Nationalized Banks are at par with the Central and State Government employees as they are also rendering services for the Government. The employees of Government Companies cannot claim the same legal rights as Government employees. 28. We are guided by the decision of the Hon ble Apex Court in A.K. Bindal Anr. (supra) wherein it was held that identity of government company remains distinct from the government. It is not identified with the Union but has been placed under a special system of Centre and conferred certain privileges. It further held that since the employees of government companies are not government servants, they have absolutely no right to claim parity. 29. This Court also takes note of the case of S.K. Dutta, ITO (supra) in which the Hon ble Supreme Court held that State has wide discretion in selecting persons or objects it will tax and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. Hon ble Apex Court further held that the State is allowed to prefer and choose districts, objects, persons, methods and even rates of taxation if it does so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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