1999 (9) TMI 29 - HC - Income Tax

Summary

Issues:
1. Validity of deductions made by the company from compensation payable to workmen opting for voluntary retirement under a scheme.
2. Maintainability of petitions under section 33C(3) of the Industrial Disputes Act.
3. Exemption of compensation from income tax and liability of the company for repayment.

Analysis:

1. The company introduced a voluntary retirement scheme where workmen completing five years of service were eligible for voluntary retirement with compensation calculated based on three alternative modes. The scheme explicitly stated that income tax, if any, would be deducted at source. Four workmen opted for voluntary retirement, and the company deducted income tax from their compensation. The workmen filed petitions under section 33C(3) of the Industrial Disputes Act, challenging the deductions. The Labour Court directed the company to repay the deducted amounts. The High Court held that the deductions were valid as per the scheme's provisions, and the company had deposited the deducted amounts with the Income-tax Department on behalf of the workmen. The court set aside the Labour Court's order, stating that the workmen could claim a refund from the Income-tax Department if required.

2. The High Court found the petitions under section 33C(3) of the Industrial Disputes Act challenging the deductions to be unsustainable. The court emphasized that the company had acted as per the scheme's express provisions in deducting income tax at source. The court rejected arguments that the compensation was not taxable income, stating that any refund claims should be made to the Income-tax Department and not against the company. The court highlighted that the company's actions were in compliance with the scheme and directed the workmen to seek refunds from the Income-tax Department.

3. The court provided directions for the efficient handling of the workmen's refund claims. The company was instructed to provide Form No. 16 to the workmen within two weeks, showing the deductions made and deposited with the Income-tax Department. The workmen were allowed to claim refunds from the Income-tax Officer, supported by relevant pleas and court decisions. The Income-tax authorities were directed to examine the claims promptly and issue refund orders if necessary within two months of receiving the applications. The court allowed the writ petitions with these directions, ensuring a streamlined process for the workmen to seek refunds and resolving the issue of income tax liability on the compensation received under the voluntary retirement scheme.