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2022 Supreme(Mad) 2819
IN THE HIGH COURT OF JUDICATURE AT MADRAS
ANITA SUMANTH, J.
Dr. P. Balasubramanian & Others - Appellant
Versus
The Chief Commissioner Income Tax (TDS), Chennai & Others - Respondent
W.P. Nos. 13419, 13432 & 13442 of 2019 & WMP Nos. 13527, 13547,13560, 13525, 13539, 13558 of 2019
Decided On : 10-08-2022
For the Petitioners:P. Kathick, Advocate. For the Respondents:S. Rajesh, Junior Standing Counsel, R1 to R3, Karthik Ranganathan, Senior Standing Counsel, R4 & R5, C. Sangamithirai, Special Government Pleader, R6 to R8, Abdul Saleem, Advocate.
The central legal point established in the judgment is that the employees of Tamil Nadu Agricultural University are considered Government servants and are entitled to the benefit of exemption under Section 10(10AA)(i) of the Income Tax Act.
Headnote:
Income Tax Act - Employees of Tamil Nadu Agricultural University - Section 10(10AA) - Sec 10(10AA) clause (i) deals with leave salary received by a Central Government/State Government and has no ceiling associated with it. Sec10 (10 AA) clause (ii) deals with leave salary received by other employees and is limited by two monetary ceilings: (a). Ten months average salary. (b). Rs.3,00,000 as per notification No.SO 588 (E) dt.31.05.2022 - The court discussed the interpretation of Section 10(10AA) and held that the petitioners, employees of Tamil Nadu Agricultural University, are Government servants, entitled to the benefit of exemption under Section 10(10AA)(i) of the Act.
Fact of the Case:
The petitioners challenge audit objections issued by local fund audit calling upon the petitioners to remit income tax on surrender of leave salary (SLS) on the ground that tax has not been deducted at source in terms of the Income Tax Act, 1961. The employees had retired from service in the year 2017 and at the time of retirement had been granted SLS. An objection was raised by local fund audit on the ground that tax ought to have been deducted under the provisions of the Act. The University sought a clarification from the local fund audit as well as from the Income Tax Department.
Finding of the Court:
The court held that the petitioners, employees of Tamil Nadu Agricultural University, are Government servants, entitled to the benefit of exemption under Section 10(10AA)(i) of the Act. The impugned circular and consequent communications issued to the petitioners by the University were contrary to law and were set aside.
Issues: The main issue was whether the employees of Tamil Nadu Agricultural University are entitled to the benefit of exemption under Section 10(10AA)(i) of the Income Tax Act.
Ratio Decidendi: The court analyzed the provisions of Section 10(10AA) and the nature of the employment of the petitioners at the University, and concluded that they are Government servants entitled to the benefit of exemption under Section 10(10AA)(i) of the Act.
Final Decision: The Writ Petitions were allowed, and the impugned circular and consequent communications issued to the petitioners by the University were set aside. No costs were awarded, and connected Miscellaneous Petitions were closed.
JUDGMENT
(Prayer in W.P.No.13419 of 2019: Writ Petitions filed under Article 226 of the Constitution of India praying to Writ of Certiorari, calling for records pertaining to the impugned proceedings issued by the 8th Respondent in Letter Dean/AC&RI/VVNR/Audit 2016-17/Dr.P.B./Prof/IT short remittance/SLS/2018 dated 30.10.2018 and clarification given by 3rd Respondent in TDS circle/Misc/2014-15 dated 17.02.2015.
In W.P.No.13432 of 2019: Writ Petitions filed under Article 226 of the Constitution of India praying to Writ of Certiorari, calling for records pertaining to the impugned proceedings issued by the 8th Respondent in Letter No.DODL/Dr.S.C.S.Prof.(Retd.)/Aduit 2016-2017 (Para No.4) and Audit 2017-2018 (Para No.3 S.No. 2)/2019 dated 19.03.2019 and clarification given by 3rd Respondent in TDS circle/Misc/2014-15 dated 17.02.2015.
In W.P.No.13442 of 2019: Writ Petitions filed under Article 226 of the Constitution of India praying to Writ of Certiorari calling for records pertaining to the impugned order issued by the 8th Respondent in Letter No.HDA/Audit Paras 2014- 15/2016 dated 14.11.2016 and clarification given by 3rd Respondent in TDS circle/Misc/2014-15 dated 17.02.2015 and quash the same.)
Common Order:
1. The petitioners challenge audit objections issued by local fund audit calling upon the petitioners to remit income tax on surrender of leave salary (SLS) on the ground that tax has not been deducted at source in terms of the Income Tax Act, 1961 (in short 'Act').
2. The petitioners are employees of the Tamil Nadu Agricultural University (University/TNAU). To be noted that the petitioners are direct employees of the University, and not employees of allied institutions or constituent colleges and the ratio of this decision will apply only to those employees who are under the direct employment of the University per se.
3. The employees had retired from service in the year 2017 and at the time of retirement had been granted SLS. An objection was raised by local fund audit on the ground that tax ought to have been deducted under the provisions of the Act. Thus, the University sought a clarification from the local fund audit as well as from the Income Tax Department.
4. The latter has, vide clarification dated 17.02.2015, stated as follows:
Government of India
Ministry of Finance, Income Tax Department
Office of the Assistant Commissioner of Income Tax,
63-A, Race Course Road, Coimbatore-18.
TDS Circle/Mar/2014-15 Date:17.02.2015
To,
The Registrar,
Tamil Nadu, Agricultural University
Coimbatore.
Sir,
Sub:-TNAU-Establishment of Earned leave – Deduction of Income Tax at par with Government Employee U/s 10 (10AA) of IT Act – Clarification issued-regarding.
Ref:- Your letter in No.A3/10842/2014 dt. 17/12/2014.
0-0
Please refer to the above communication.
The clarification sought by you is on Sec 10 (10AA), which deals with exemption on encashed earned leave by employees.
Sec (10AA) clause (i) deals with leave salary received by a Central Government/State Government and has no ceiling associated with it.
Sec10 (10 AA) clause (ii) deals with leave salary received by other employees and is limited by two monetary ceilings:
(a). Ten months average salary.
(b). Rs.3,00,000 as per notification No.SO 588 (E) dt.31.05.2022
You have pointed out that LF Audit has raised an objection for your treating the university employees as government employees.
I have studied the implication of the LF Audit.
As of now, there are no instructions/circulars/Notifications from the CBDT, the governing body for the administration of direct taxes in India, extending (or ) treating University employees as Government employees.
Additionally, your kind attention is invited to the following existing sections, which distinguish between a government employee and a University employee. Sec 192 (2A) of the IT Act, while listing types of employees, includes University employees with non-government servants only. Further, the Explanation to this sub-section exclusively
