Sanchar Nigam Pensioners Vs Union of India (Kerala High Court)
The writ petition was filed before the Kerala High Court challenging a “Corporate Office Letter” issued by the sixth respondent through its Deputy General Manager (Taxation). The first petitioner is an association of retired employees of a telecommunications company, while the second and third petitioners are members of that association.
The second and third petitioners were originally employed with the Department of Telecommunications (DoT). After the creation of the sixth respondent company, they opted to continue their service with the company. Later, the company introduced a Voluntary Retirement Scheme (VRS) in 2019. The second and third petitioners opted for retirement under this scheme.
Subsequently, the petitioners discovered that while calculating their retirement benefits, the company deducted certain amounts as tax allegedly payable on leave encashment under the Income Tax Act, 1961. The deduction was made relying on the communication challenged in the writ petition. The petitioners approached the High Court contending that the leave encashment amounts were not taxable and therefore tax should not have been deducted. They also sought directions to the Income Tax Department to refund the amounts deducted and remitted.
The petitioners argued that the challenged communication was issued in disregard of statutory provisions. According to them, the company did not have the authority to issue an executive instruction that would effectively modify statutory provisions. They relied on Section 10(10AA) of the Income Tax Act, which deals with exemption of leave encashment. They contended that their case fell under clause (i) of the provision, which applies to employees of the Central Government or a State Government. Therefore, they argued that the leave encashment amounts received by them were exempt from tax.
