In Brief
Coal India Limited employees challenged the income tax deduction on gratuity received before the Payment of Gratuity (Amendment) Act, 2010 came into force on 24 May 2010. They argued the amendment should apply retrospectively from 1 January 2007 when the enhanced gratuity ceiling of Rs. 10 lakhs was approved. The Supreme Court dismissed the appeal, holding that gratuity is a one-time payment crystallizing on the retirement date, unlike recurring pensions. Therefore, the commencement date cannot be applied retrospectively. The exemption under Income Tax Act applies only to amounts calculated under the statute as it existed at the relevant time, limiting relief to Rs. 3.5 lakhs before the amendment came into force.
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