JUDGMENT : H.L. Ghokhale, J. The first petitioner herein is a trade union, registered under the Trade Unions Act, representing employees employed under the State Government in the Government Press and Book Depots. The second and third petitioners are the office bearers of the said union. The petition seeks to challenge the action of the respondents in denying the benefit of exemption from payment of income-tax at source at the time of voluntary retirement of the members of the first petitioner union under a scheme known as 'Special Adhoc Voluntary Retirement Assistance Scheme' framed by the State of Gujarat, which is the first respondent herein. Respondent No. 2 to 4 are the officers of the first respondent. The 5th respondent is the Union of India, the 6th respondent is the Commissioner of Income-tax and the 7th respondent is the Secretary of the Central Board of Direct Taxes. 2. The first respondent appointed a Committee some time in the year 1988 to examine the question of modernising the existing Government and the Presses throughout the State of Gujarat and the Committee recommended that with a view to bringing about modernisation, it may be necessary to reduce the staff strength in the presses. This was partly because substantial number of the employees concerned were not trained for the modern techniques. The Government, therefore, came out with the aforesaid scheme by its resolution dated 4th June, 1992. The operating paragraph of the resolution reads as follows :- "Modernisation scheme has been implemented in Government Presses. Consequently, it has become necessary to reduce the staff. Moreover, latest technically trained personnel are also required to be recruited for running the latest modern machinery. In view of this, it was under consideration of the Government to implement the Lumpsum Pensionary Retirement Benefit Scheme so that the old technical staff working in the Presses may incline to have voluntary retirement. After considering this matter carefully, the Government has decided to publish/issue the Lumpsum Pensionary Retirement Benefit Scheme for the technical staff of the Government Presses mentioned in the statement attached herewith." The relevant clauses of the said scheme are as follows :- "(1) Benefit of this scheme can be availed by Class-III and Class IV Technical Staff of Government Presses. After considering this matter carefully, the Government has decided to publish/issue the Lumpsum Pensionary Retirement Benefit Scheme for the technical staff of the Government Presses mentioned in the statement attached herewith." The relevant clauses of the said scheme are as follows :- "(1) Benefit of this scheme can be availed by Class-III and Class IV Technical Staff of Government Presses. (2) The one who accepts this scheme can avail the unused leave encashment benefit which is given at the time of superannuation according to the prevailing rules of the Government. (3) As per present gratuity rules, 15 days pay is given for every completed year. Instead of that 21 days pay shall be given for every completed year. At present, the gratuity is being paid after completion of 5 year of consecutive service. Instead, under scheme, the employee who is, regularly appointed and has completed more than one year shall also be paid at the above rate i.e. 21 days' gratuity. (4) The one who accepts the above scheme shall be paid 3 months' pay + D. A. for each of the completed year. But they shall not be entitled for pensionary benefits." 3. As it can be seen, this scheme was a one point proposal to the employees, which would have given them some substantial benefits if they decide to voluntarily retire earlier. It is also pertinent to note that the scheme was meant for the Class III and Class IV technical staff employed in the Presses under the first respondent. 4. It so happened that, after a substantial number of employees opted for voluntary retirement under the said scheme, the Government decided to deduct the income-tax, which would be payable on receiving the said lump sum Payment. The first petitioner-Union, therefore, represented to the Government, pointing out that the benefits which are payable under the scheme would not fall under the concept of 'income' and will be totally exempt from the payment of tax. The first respondent-State Government in its turn, represented to the income-tax authorities and sought their advice. The first petitioner-Union, therefore, represented to the Government, pointing out that the benefits which are payable under the scheme would not fall under the concept of 'income' and will be totally exempt from the payment of tax. The first respondent-State Government in its turn, represented to the income-tax authorities and sought their advice. Since they had sought the advice of the income-tax authorities by their letter dated 29th April, 1993, which is at Annexure "I" to the petition, the Deputy Secretary of the Industries Department, informed the General Secretary of the first petitioner-union, amongst others, as follows :- "We have entered into a correspondence with the Central Government as to whether the amounts payable under scheme will be subject to payment of income-tax. However, we have not received any reply from them so far." The petitioners, therefore apprehended that the Government will go ahead with the deduction of tax at source and, hence, filed the present petition and moved for interim relief. 5. A Division Bench of this Court, which heard the matter at the admissional stage, admitted the petition and passed the following order with regard to the prayer for interim relief - "In our opinion the ends of justice would be met if respondent No. 4 is directed to make payment of the amount payable to each of the employee after deduction of the amount of income-tax which according to the respondent is payable by the employee concerned. It is further directed that this amount so deducted towards income-tax shall be deposited in a Nationalised Bank and it shall be initially invested in a fixed deposit for a period of one year. As regards the amount invested as indicated here in above, the final order will be passed by the Court hereafter. The respondents are directed to file affidavit-in-reply latest by October 13, 1993, Thereafter it will be open to either party to request the Court for a fixed date of hearing". 6. When the matter reached final hearing, we have heard the counsel for the State Government as well as that for the Income Tax Department and the petitioners. The submission on behalf of the petitioners has been primarily with respect to the payment under clause (4) of the scheme. 6. When the matter reached final hearing, we have heard the counsel for the State Government as well as that for the Income Tax Department and the petitioners. The submission on behalf of the petitioners has been primarily with respect to the payment under clause (4) of the scheme. This is because the petitioners pointed out that the Government had, in the meanwhile, cleared the payments with respect to gratuity and the leave encashment without claiming any amount with respect to tax. With respect to the amounts payable under clause (4), namely, the amount of 3 months' pay + D. A. for each of the completed year, it was pointed out that, the clause itself says that the said payments were essentially in lieu of pensionary benefits. It was, therefore, submitted that the payment under the said clause will have to be construed as falling under Section 10(10A)(i) of the Income Tax Act, which should not be included while computing the total income. The said section 10(10A)(i) reads as follows :- "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included - (10A) (i) Any payment in commutation of a pension received under the Civil Pension (Commutation) Rules of the Central Government or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or a corporation established by a Central, State or Provincial Act; It was submitted on behalf to the petitioners that, if a scheme is framed by the State Government, which is similar to the provision pertaining to payment in commutation of pension available under the Civil Pension (Commutation) Rules of the Government of similar to the various schemes which are mentioned therein and if it is extended to the members of the Civil Services of the State Government, the said payment will have to be construed as exempted. 7. 7. Similar provision came up to be considered by learned single Judge of the Karnataka High Court in C.P. Ohrie v. Accountant General, Karnataka, reported in 127 ITR 122. After construing the relevant provisions of the said scheme the learned Judge of the said Court observed as follows :- "The relief or exemption provided in Section 10(10A) under such similar scheme cannot be restricted to the extent of the amount received in commutation of pension under the Civil Pension (Commutation) Rules. If there is a scheme apart from the Civil Pension (Commutation) Rules, by which a person is governed, the operation of Section 10(10A) must extend to the amount received under that scheme by that person and cannot be limited under some other provision. Whenever such a limitation was intended, the legislature has made specific provision in that behalf. For example, in Section 10(10A)(ii) provision is made in respect of payment in commutation of pension received under any schemed of any other employer and the extent to which the amount would not be included in the computation of total income is restricted." A Division Bench of the Delhi High Court consisting of S. Ranganathan and Mrs. Leila Seth, JJ., in the case of C. K. Karunakaran v. Union of India, reported in 127 ITR 136, while construing a similar scheme approved that aforesaid judgment and observed as follows :- ".......... if one peruses clauses (10), (10A) and (11) of Section 10 of the Income-Tax Act, 1961, one finds that these unequivocally be speak the intention of the Legislature to exempt all terminal benefits received by a Government servant - Whether called death-cum-retiorement gratuity or pension or any other name and in this context, it would not be correct to interpret the relevant clause as breaking away from this pattern in the absence of compulsive language." 8. We are in respectful agreement with the said views and the benefit under clause (4), of the Scheme concerning the present petition will have to be held as falling under Section 10(10A)(i) of the Income-Tax Act, 1961. 9. We are in respectful agreement with the said views and the benefit under clause (4), of the Scheme concerning the present petition will have to be held as falling under Section 10(10A)(i) of the Income-Tax Act, 1961. 9. The Centre Board of Direct Taxes also accepted the decision of the Delhi High Court and issued circular No. 286 dated 17th November, 1980, to the following effect :- "Section 10(10A)(i) of the Income-Tax Act, 1961 - Commutation of Pension - Extent of exemption - Clarification regarding - Attention is invited to Board's Instruction No. 1191 dated 1st July 1978, on the above subject. Para 5 of the said Instructions clarify that in the case of a Government servant absorbed in a public undertaking on or after July 24, 1971, the amount that would qualify for tax exemption under the provisions of section 10(10A)(i) of the Income-Tax Act, 1961, would only be the amount representing the commuted value of ?rd of the pension. The remaining two-third amount received by the person by way of terminal benefit would be includible in the total income subject to relief under Section 89(1) of the Income-Tax Act, 1961, read with rule 21A of the Income-Tax Rules, 1962. 2. The issue has been recently decided by a Division Bench of the Delhi High Court. The High Court, while allowing a writ petition, relied upon rule 37A of the Pensions Rules, 1972, which provides for payment of lump sum amount to the persons absorbed in public sector Corporations. It has been held that rule 37A Provides for payment of lump sum in lieu of the pension. The lump sum was bifurcated into two component parts under clauses (a) and (b) of rule 37A(1) but the fact that it is bifurcated into two parts neither alters the nature of the payment nor does it ceases to be a payment in lieu of pension. Therefore, by virtue of the language of section 10(10A)(i) which speaks of any payment under any similar scheme applicable to the members of the civil services of the Union, the entire commutation was held to be exempt under section 10(10A)(i). 3. The Board have been advised that the decision of the Delhi High Court is to be accepted. 4. In view of the above, Instruction No. 1191 stands withdrawn with immediate effect. 3. The Board have been advised that the decision of the Delhi High Court is to be accepted. 4. In view of the above, Instruction No. 1191 stands withdrawn with immediate effect. All appeals/revision petitions/reference applications on this point my be conceded/withdrawn in the light of this circular. 5. This may be brought to the notice of all the officers working in your charge". 10. On behalf of the State Government, it was submitted that they had represented to the Income Tax Department and since no guidance has been received from them, they had proposed to go for deduction when the order came to be passed by the High Court. It was submitted on behalf of the State that whatever decision may be taken by us will be accepted by the State Government. 11. Mr. Thakore, learned counsel appearing on behalf of the Income Tax Department, submitted that, in the proper course of things, each of the employees concerned should have been asked to file a return, prior whereto, the tax amount ought to have been deducted and, in case he was entitled to get a refund of it, the employee concerned would have been refunded the amount. In our view, such an approach will not be proper one in the instant case. Here, we are required to construe the provisions of a scheme, as to whether the amounts received under the particular clause will form a part of the income itself. It will not be proper, for the purpose, to drive the Class III and Class IV employees to file the return prior whereto, the tax amount is deducted and, subsequently, they may obtain the refund, if they are entitled to. Apart from the provisions of the scheme, in our view, the payment receivable under clause (4) of the said scheme squarely falls under the beneficiary provision of clause (10A) (i) of Section 10 of the Income-Tax Act, 1961, and hence will not form a part of 'income' for the purpose of taxation. 12. That being the position, the petitioners are entitled to the declaration that they have sought in prayer (B) of the petition that the respondents have no jurisdiction or authority in law to deduct the income-tax at source on the amount of retirement benefit, which is payable to the employees covered under the particular scheme. 12. That being the position, the petitioners are entitled to the declaration that they have sought in prayer (B) of the petition that the respondents have no jurisdiction or authority in law to deduct the income-tax at source on the amount of retirement benefit, which is payable to the employees covered under the particular scheme. We, however, make it clear that this declaration is being made only with respect to clause (4) of the scheme. This is because the amounts payable under other clause of the scheme have already been paid without deduction of tax. The amount of tax payable under this clause has been deposited in a nationalised bank in pursuance of the order passed by the Division Bench, which admitted this petition, under order dated 16th September, 1993. The authorities concerned are directed to release the said amount with interest in favour of the particular employees within four weeks from the date of receipt of writ of this Court. Thus, rule is made absolute in the above terms with no order as to costs.