In Brief
Coal India Limited employees challenged the commencement date of the Payment of Gratuity (Amendment) Act, 2010. They had received gratuity under a 2008 office memorandum with a Rs. 10 lakh ceiling before the Act formally came into force on 24.5.2010. Tax was deducted from these payments. The employees argued the Act should apply retrospectively from 1.1.2007 so gratuity would be tax-exempt. The Supreme Court held that gratuity, being a one-time payment crystallising on the retirement date, differs fundamentally from recurring pensions. The commencement date fixed by the executive is not retrospective, and tax exemption under the Income Tax Act applies only to gratuity under the statutory limit existing on the payment date. The appeal was dismissed.
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