New Delhi: The pension of a disabled person is exempted from being taxed even in a case of voluntary retirement, the Gujarat High Court has ruled, granting relief to a retired Army officer who sustained serious spinal injuries during an operation about 40 years ago.
It directed the principal commissioner of income tax to refund the I-T paid by the petitioner, Lt. Colonel Nikhil Subodh Gujjar (retired), along with interest at the rate of 9 percent per annum.
In doing so, a bench of Justices Bhargav D. Karia and Pranav Trivedi set aside a March 2024 order passed by I-T principal commissioner under Section 119(2)(b) under the Income Tax Act, 1961, which essentially allows the Central Board of Direct Tax (CBDT) to authorise tax authorities to accept delayed claims for tax benefits like refunds and deductions.
For instance, those taxpayers who were unable to file their Income Tax Returns (ITR) within the prescribed deadline, due to unavoidable circumstances or in cases of “genuine hardship”, can claim the benefit of this provision.
Essentially, when a serving Army officer is injured and disabled on duty, they are eligible for a disability pension. The percentage of disability which is required to get this pension is 20 percent or more.
In this case, initially the officer was classified under the 20 percent disability category, but after a later assessment, the board of army medical specialists at Ahmedabad placed him at a significant disability category of 30 percent in 2018.
In the March 2024 order, the I-T principal commissioner invoked a circular issued by the CBDT, which said that only those armed forces personnel whose disability is attributable to service will be eligible for tax exemption, and not to those that opt for voluntary retirement. However, the former army officer argued that this circular which was issued in 2019, was under challenge before the Supreme Court in another case.
The bench relied on a very similar ruling passed by the Gujarat HC in Colonel Madan Gopal Singh Negi vs CIT (2019) in its November 13 ruling, where it said there was no other choice except to refund the amount being claimed by the disabled Army Officer.
“Our Army soldiers, naval officials and fighters are day and night protecting our territorial borders from enemy infiltration and attacks and even while putting their life to the greatest risk,” the court had said in this 2019 judgment.
In that case, the Gujarat HC had noted that Army officers cannot be unnecessarily harassed or troubled, for technical adherence to some archaic administrative procedures, when there is “no thoughtful purpose” to be achieved, while denying them legitimate relief.
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The journey
Lt. Colonel Gujjar (retired) had suffered serious spinal injuries after falling down from the Mallangam pass, which is located at 15,000 ft., during an operation carried out against the enemy when he posted in J&K’s Uri in 1985.
In May 2000, the officer opted for voluntary retirement after serving for more than 22 years, after his injuries left him in the A3 medical category that includes medical problems like an injured appendage, arm or leg. His medical condition had led him to be barred from attending all future professional courses and selection grade promotions.
In March 2019, the officer requested the I-T principal commissioner to refund the taxes paid by him in relation to his disability pension between the assessment years 2006-2007 and 2018-2019.
His lawyer argued that under Section 237 of the Act, if the tax amount paid by a person is more than what’s chargeable, they would be entitled to a tax refund. Significantly, he said under Section 297(2) of the Act, disability pension is exempted income, meaning it is exempted from being taxed.
What court ruled
Relying on the 2024 Delhi High Court ruling in the case of Sun Pharmaceutical Industries, the court noted that Section 239(2) was deleted from the 1961 Act, as it set a period of limitation for instituting claims for refund. The court also noted that the CBDT itself in its numerous circulars spoke of tax erroneously deducted in some cases.
Similarly, the bench relied on the Madhya Pradesh HC’s 2020 ruling in Colonel Ashwani Kumar Ram Singh vs. I-T principal commissioner, where the court said that a belated or later claim filed after the period of limitation is over, can be entertained if certain conditions are fulfilled.
Since in this case, the army officer was charged in excess of what he should have been charged, the court noted he was covered under this.
The court then directed the tax authority to process the officer’s claim and grant him the refund to which he is lawfully entitled within 60 days.
“The respondents are directed to refund the amount of income tax paid by the petitioner for the relevant Assessment Years along with interest at the rate of 9 percent per annum within a period of three months from the date of receipt of a copy of this order,” the court said, adding that the CBDT circular will not come in his way.
(Edited by Tony Rai)
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