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Amendment in the Gratuity Act increasing the rate of Gratuity to Ten Lakhs under Sec 4(3) is not retrospective: SC

The SC on August 13, 2021 {KRISHNA GOPAL TIWARY & ANR. vs. UNION OF INDIA & ORS.} held that what is exempt from the Income Tax Act is the amount of gratuity received under the Gratuity Act to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of Section 4 of the Gratuity Act. It was held that the Gratuity Act contemplated rupees ten lakhs as the amount of gratuity only from 24.5.2010 and such gratuity is the amount payable only once. Thus, it was held that the cut-off date cannot be said to be illegal, it being one-time payment, therefore, such amendment in the Gratuity Act cannot be treated to be retrospective. Therefore, it was held that the provisions of the statute cannot be said to be retrospective. 

It was observed by the Bench, comprising of  Justice HEMANT GUPTA & Justice A S BOPANNA that the date of commencement fixed by the Executive in exercise of power delegated by the Amending Act cannot be treated to be retrospective as the benefit of higher gratuity is one-time available to the employees only after the commencement of the Amending Act. It was held that the benefit paid to the appellants under the office memorandum is not entitled to exemption in view of specific language of Section 10(10)(ii) of the Income Tax Act.

The challenge in the present appeal before the SC was to an order passed by the High Court of Jharkhand on 27.7.2016 whereby the claim of the appellants to declare the applicability of Payment of Gratuity (Amendment) Act, 2010 from 1.1.2007 was declined.

In view of above, the SC did not find any error in the order passed by the High Court. The appeal was dismissed.

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