TMI Blog2001 (10) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.5,29,765 to the petitioner in W. P. No. 14218 of 2001, has to be paid within 30 days of relief and the balance of 50 per cent. of compensation is payable in five equal annual instalments with interest at 10 per cent. per annum. The management of the Syndicate Bank, represented by respondents Nos. 1 and 2, herein, while paying 50% of compensation to the petitioners, deducted a sum of Rs.1 ' 20,000 in the case of the petitioner in W. P. No. 14201 of 2001 and a sum of Rs.1,36,000 in the case of the petitioner in W. P. No. 14218 of 2001 towards the income-tax liability of the petitioners. Hence, these two writ petitions by these two retired officers of the Syndicate Bank praying for mandamus declaring the action of the management of the Syndicate Bank in deducting the tax at source from out of the 50% of compensation payable to the petitioners under the VRS as illegal, arbitrary and ultra vires the provisions of the Income-tax Act, 1961 (for short "the Act"), and for a consequential direction to the management of the Syndicate Bank not to deduct the above sums of money from 50% of the compensation payable to them towards income-tax liability. In response to rule nisi, respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablished or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or (vii) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Indian Institutes of Technology Act, 1961 (59 of 1961); or ... (viii) such institute of management as the Central Government may, by notification in the Official Gazette, specify in this behalf ; at the time of his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees: Provided that the schemes of the said companies or authorities or societies or Universities or the institutes referred to in sub-clauses (vii) and (viii), as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including, inter alia, criteria of economic viability) as may be prescribed: Provided further that where exemption has been allowed to an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary; and (iii) arrears of salary. Section 17 defines the terms "salary", "perquisite" and 'profits in lieu of salary" for the purposes of sections 15 and 16, Accordingly, salary includes wages, annuity or pension, fees, commissions, perquisites or profits in lieu of or in addition to salary or wages, advance salary, leave salary, annual accretion in a recognised provident fund, and the aggregate sums in the transferred balance in a recognised provident fund. 'Perquisite' has been defined in section 17(2) and 'profits in lieu of salary" are defined in section 17(3). Thus, section 17 contains definitions within definitions. It is very pertinent to note that the definitions contained in section 17 are only for the purposes of sections 15 and 16 and not for any other sections of the Act. The Finance Act, 1987, inserted clause (10C) in section 10 to provide that any payment received by an employee of a public sector company at the time of his voluntary retirement in accordance with any scheme which the Central Government may, having regard to the economic viability of the public sector undertaking and other relevant circumstances, approved in this behalf, shall be exempt from tax. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. This takes us to the question whether the management of the Syndicate Bank was justified in deducting tax at source under section 192 of the Act and whether the petitioners are entitled to refund of the tax so deducted at source. Sub-Chapter (B) of Chapter XVII contains provisions of sections 192 to 206B dealing with deduction of at tax source in different situations contemplated thereunder. What is deductible at source is only the tax at the rate applicable on the amount which has actually fallen due and is paid. Only in a case where a salary accrued to an employee and the same is paid, the employer can deduct tax at source under section 192 of the Act and not otherwise. In other words, accrual as well as payment of salary should co-exist in order to attract the provisions of section 192. A perusal of the provision of sub-section (1) of section 192 shows that any person responsible for the payment of income chargeable under the head of income "Salaries" at the time of payment has to deduct income-tax on the amount payable at the average of income-tax computed on the basis of the rates in force on the estimated income of the assessee under this head for the financial year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rates in force for the financial year and at that rate, the TDS has to be effected on the amount paid at the time of such payment. The resultant position emerging from the above discussion is that the average rate of tax deductible has to be arrived at while paying certain amount, which is chargeable under the head of income "Salaries". Thereafter, the average rate thus arrived at by the employer has to be applied for effecting deduction of tax deducted at source, while making actual payment, This is how TDS has to be effected throughout the year on all the payments chargeable under the head of income 'Salaries". In that view of the matter, the petitioners are not entitled to get the benefit of the provisions of section 10(10C) with reference to 50 per cent. of the amount of the ex gratia actually paid, thereby avoiding the tax deduction at source to the extent of Rs.5 lakhs. The exemption that is available under section 10(10C) has to be allowed while estimating the annual income of the person receiving the salary, but not in respect of any single payment that may be made by the employer. In that view of the matter, it becomes imperative for the respondent-bank first to esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of money actually handed over to an employee monthly but will also include various other things including perquisites and the estimate is to be made in accordance with the provisions contained in sections 15, 16 and 17. The deduction of income-tax may have to be made at the time of payment of salary but the calculation of the tax deductible will have to be made on the estimated salary income of the employee for the relevant financial year according to the provisions of the Act and the Rules framed for this purpose. There is no warrant for the pro position that the amount of income-tax deductible will be calculated only on the amount that is actually handed over to the assessee." From the above judgment also it is clear that the TDS has to be worked out after estimating the annual income chargeable under the head of income "Salaries" and also arriving at the average rate of income-tax computed on the basis of the rates in force on the said estimated income of the assessee. There fore, the computation of the TDS taking the entire sum of Rs.9,44,000 in the case of the petitioner in W. P. No. 14201 of 2001 and a sum of Rs.10,59,540 in the case of the petitioner in W. P. No. 1421 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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