SC to hear disability pension tax case

Vijay Mohan

Tribune News Service

Chandigarh, March 2

The Supreme Court (SC) today fixed the matter pertaining to deduction of income tax on disability pension of defence personnel for urgent hearing on March 6. The case was tentatively scheduled to come up for hearing on March 16.

A circular was issued by the Principal Controller of Defence Accounts (Pensions) to various banks asking them to deduct income tax from the pensions of disabled soldiers. Consequently, meagre amounts have been credited into their accounts as pension for the month of February, with some receiving as little as Rs 100. This had caused dismay and resentment amongst them.

Counsel for some of the petitioners, Col Indra Sen Singh (retd) said that the apex court was appraised about the urgency of the matter today as a status quo imposed by the court on the issue has apparently been violated by the authorities. The earlier order of August 2019 directing the status quo was produced before the court for its perusal.

The Central Board of Direct Taxes (CBDT) had in June last year issued a circular in which it had opined that disability pensions of soldiers who were released on superannuation from the Army were taxable while those who were ‘invalided out’ prematurely from service were exempted.

This circular was challenged by disabled soldiers who contended that this was in contradiction to military pension rules which treat all disabled soldiers as ‘invalided’ for the purposes of disability pension. When the matter reached the SC, it directed “status quo” on the same.

The income tax department had later submitted that no instructions had been circulated to the banks to deduct tax and that the circular was only issued as a clarification not for disability pensioners but only for those cases where a person superannuates and thereafter develops a disability.

Officers privy to the matter say that the circular was issued by the CBDT by processing the file through 10 officers in the departmental hierarchy on a single day on June 24, 2019, based on an old case initiated by the finance wing of MoD in 2015.

Sources in the MoD point out that even the ministry was taken by surprise with the circular and under the rules of business the Finance Department of the MoD had no jurisdiction over the subject which came under purview of Department of Ex-Servicemen Welfare (DESW).