Case Law Details
Balan Panicker Ramesh Kumar Vs Union of India (Kerala High Court)
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
The case of Balan Panicker Ramesh Kumar vs. Union of India, decided by the Kerala High Court, revolves around the issue of income tax exemption on encashment of earned leave salary under Section 10 (10AA)(ii) of the Income Tax Act, 1961. The petitioners, retired employees of Public Sector undertakings and Scheduled Banks, challenged the government’s failure to revise the income limit for tax exemption on earned leave salary since 2002.
Background and Arguments
Petitioners’ Contentions: The petitioners argued that despite several pay revisions since 2002, the government had not revised the upper limit of Rs.3 lakhs specified in the notification. They contended that they retired before the latest notification in 2023, which increased the exemption limit to Rs.25 lakhs. They sought a retrospective revision of the income limit to benefit from the increased exemption.
Government’s Position: The government, through its Standing Counsel for Revenue, acknowledged the delay in updating the income limits. They pointed out that while there were judicial precedents directing consideration for revision, the actual notification was issued only in 2023, effective from April 1, 2023. They argued that decisions on such policy matters lie within the domain of the Executive and cannot be dictated by judicial mandate.
Court’s Decision
The Kerala High Court, citing its earlier judgment in W.P.(C) No.16609 of 2022 and connected cases, established the following key points:
Executive Prerogative: It reiterated that it is the prerogative of the government to fix the income limits for tax exemptions on earned leave salary. The Court emphasized that without a notification from the government revising the limit, employees cannot claim exemption from income tax on encashment of earned leave beyond the notified limit.
Limitation on Judicial Powers: The Court acknowledged the sympathy for the petitioners’ situation but underscored the limitations of judicial intervention in policy matters. It cited the doctrine of separation of powers, emphasizing that decisions on revising income tax exemption limits fall squarely within the Executive’s purview.
Disposal of Writ Petitions: In light of the above considerations, the Court disposed of the writ petitions with the following directives:
- The petitioners were granted liberty to approach the government with their representations for consideration of their grievances.
- The government was urged to expeditiously decide on these representations, implying that the matter of revising the income limits would be reconsidered by the Executive based on the petitioners’ submissions.
Conclusion
The judgment reinforces the principle that the revision of income tax exemption limits for earned leave salary is a matter for the government to decide through notifications. Judicial intervention is limited to ensuring that the Executive acts within the bounds of the law and the Constitution. While expressing sympathy for the petitioners’ plight, the Court upheld the separation of powers and declined to issue a mandamus directing the government to retrospectively revise the income limits. Instead, it provided a pathway for the petitioners to seek relief through the appropriate administrative channels.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The writ petitions are filed, inter alia, for direction to the respondents to review the income limit for taxing purposes on earned leave salary under Section 10 AA (ii) of the Income Tax Act, 1961 with retrospective effect, inasmuch as after 2002 there had 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.
2. The petitioners in these cases are retired employees of different Public Sector undertakings and Scheduled Banks. All the petitioners retired from service before 01.04.2023.
3. When these writ petitions came up for consideration today, it is submitted by the counsel on both sides that, the similar issues have been considered and decided by this Court by Judgment dated 29.01.2024 in W.P.(C) No.16609 of 2022 and connected cases wherein this Court after referring to Section (10AA)(ii) of the Income Tax held as follows:-
“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.
5. 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 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.
6. 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.
7. In view thereof, the Court, though, has sympathy with the petitioners, but considering the 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.
8. Thus, these writ petitions are disposed of with liberty to the petitioners to approach the Government for the reliefs sought for in these writ petitions, and the Government may take a decisions on their representations.”
I do not find any reason to take a different view.
Therefore, these writ petitions are also disposed of, with liberty to the petitioners to approach the Government for the reliefs sought for in these writ petitions, and the Government may take a decision on their representations, expeditiously.
Author Bio
