GWALIOR RAYONS STAFF ASSOCIATION Vs. UNION OF INDIA

JUDGEMENT

(1.) The first petitioner is the Gwalior Rayons Staff Association, represented by its joint secretary. Second petitioner is a member of staff as also a member of the first petitioner-association. The prayer made in this original petition is to declare that the provisions of section 10(10)(iii) of the Income Tax Act to the extent it has allowed exemption based on the method of calculation as illegal and discriminatory and for other consequential reliefs.

(2.) It is the case of the petitioners that they are not governed by the Payment of Gratuity Act, 1972, in the matter of payment of gratuity; but are governed by the terms and conditions of the settlement between the employees and the management of Grassim Industries Ltd. It is the contention of the petitioners that as per the settlement between the parties, the employees will be entitled to gratuity at a rate higher than what is prescribed under the Payment of Gratuity Act. In the case of employees whose duration of service is between 5 to 10 years they will be receiving 15 days' salary inclusive of daily allowance, between 10 to 15 years, 20 days' salary inclusive of daily allowance and so on. In other words, the rate of gratuity is not uniform but it will vary according to the length of service put in by each of the employees in the establishment. As per section 10(10)(iii) of the Income Tax Act, any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, etc. as the case may be, to the extent it does not exceed one-half month's salary for each year of completed service, subject to a maximum as prescribed by the Government, will stand exempted from his income. It is the contention of the petitioners that the limit prescribed under the above said provision limiting it to 15 days' wages for every year of completed service is discriminatory and violative of Art. 14.

(3.) The above said provision is in force for the past two decades and thus stood the test of time. As per section 10 of the Income Tax Act, the amount specified therein will not form part of the income of the assessee for the purpose of assessment. Section 10(10)(i) also is a similar provision providing for exclusion of the amount received by way of death- cum-retirement gratuity (DCRG) under the revised Pension Rules of the Central Government or under any other similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union or to the members of the All-India services or to the members of the civil services of a State or holders of civil posts under a State, etc. The original petition does not, however, give any data as to whether as per the said Pension Rules governing the matter of payment of DCRG (to) the civil services personnel, the rate is at 15 days' wages for every year of completed service. If only it is shown prima facie that such rules also provide for payment of DCRG in excess of 15 days' wages which stands totally excluded under section 10(10)(i), the further question regarding discrimination will arise for consideration. As far as section 10(10)(ii) is concerned, it admits of no doubt that it excludes gratuity payable under the Gratuity Act and by virtue of section 4 of Payment of Gratuity Act the rate of gratuity payable is only 15 days' wages for every year of completed service. In other cases not governed by section 10(10)(i) or 10(10)(ii), there section 10(10)(iii) applies which excludes the gratuity amount upto rate of 15 days' wages for every year of completed service subject to a maximum in this regard. Therefore, the gratuity that has been excluded and the prescription of the rate is irrespective of whether it is paid under the Gratuity Act or any other scheme.