Mohan Lal Rathore and Parmanu Vidyut Karamchari Union (CITU) V. Union of India and Income Tax Department and Site Director, RAPS 1 to 6 and Deputy Secretary, Government of India, Department of Atomic Energy and Executive Director (Personnel), NPCIL

CW/1129/2005

AI Insights

The case involves multiple writ petitions and contempt petitions filed by employees of the Department of Atomic Energy, who were later absorbed into NPCIL, challenging the withholding of their retirement gratuity for seven years and the taxation of interest earned on this gratuity. The employees argued that the gratuity should not be withheld and the interest earned should not be taxable. The respondents, including NPCIL and the Income Tax Department, defended the withholding and taxation based on the agreement at the time of absorption and relevant tax laws. The court examined the agreements, tax provisions, and precedents to arrive at its decision.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 701645 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 30-01-2017
• Assessment Year: misc
• Other Referred Cases: S. S. Miranda Ltd. Vs Shyam Bahadur Singh, All India Reporter Limited v. Ramchandra D. Datar
• Laws Referred To: Income Tax Act, Contempt of Court Act, C.C.S. (Pension) Rules, 1972
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: DHARMENDRA JAIN; PARINITI JAIN; TARUN VERMA
• Assessee Lawyers: SURESH KASHYAP; YOGESH SHARMA
• Keywords: Absorption; Contumacious conduct; Deputation; Gratuity; Income Tax; Pension; Tax Deduction
• Section: 192; 10 15 (IV) (I); 194-A (VI)

Judgement Text

" -1- [CW6394/2006] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S. B. CIVIL WRIT PETITION NO.6394/2006 Mohan Lal Rathore son of Shri Mangi Lal Rathore, by caste Teli, resident of Begu, Tehsil Begu, District Kota. ----Petitioner Versus 1. Union of India- through Commissioner, Income Tax Department, Ward NO. 2 Government of India, Income Tax Office, Near CAD Road, Kota. 2. Income Tax Officer, Department Of Income Tax, Ward-1 (2), Kota. 3. Site Director, RAPS 1 to 6, RAPS, Plant Site, Rawatbhata, P . O. Anushakti, Via Kota (Raj.) 4. Deputy Secretary, Government of India, Department of Atomic Energy, CMS Marg, Mumbai-400039 ----Respondents Connected With S. B. CIVIL WRIT PETITION NO.1129/2005 Parmanu Vidyut Karamchari Union (CITU), through its Secretary son of Shri K. L. Choudhary, aged about 43 years, C-2/17, PH-II, Rawatbhata via Kota (Raj.) ----Petitioner Versus 1. Union Of India – through Deputy Secretary, Government of India, Ministry of Personal, Public Grievances & Pensions, 6th Floor, Nirvachan Sadan, New Delhi. 2. Site Director, RAPS 1 to 6, RAPS, Plant Site, Rawatbhata, P . O. Anushakti, Via Kota (Raj.) 3. Income Tax Department, Ward NO. 2 Government of India, Income Tax Office, Near CAD Road, Kota. -2- [CW6394/2006] 4. Deputy Secretary, Government of India, Department of Atomic Energy, CMS Marg, Mumbai-400039 ----Respondents S. B. CIVIL WRIT PETITION No.2159/2005 Parmanu Vidhyut Karamachari Union (CITU) through its Assistant Public Secretary, Goverdhan Lal Verma S/o Shri Latur Lal, aged about 45 years, Resident of T-1 to 5, ESL (Anu Deep Colony) P . O. Bhabha Nagar, Rawatbhata, Via Kota. ----Petitioner Versus 1. Union Of India – through Deputy Secretary, Government of India, Ministry of Personal, Public Grievances & Pensions, 6th Floor, Nirvachan Sadan, New Delhi. 2. Site Director, RAPS 1 to 6, RAPS, Plant Site, Rawatbhata, P . O. Anushakti, Via Kota (Raj.) 3. Executive Director (Personnel), NPCIL, V S Bhawan, Anu Shakti Nagar, Mumbai. 4. Income Tax Commissioner, Ward NO. 2, Income Tax Office, Near CAD Road, Kota. 5. Deputy Secretary, Government of India, Department of Atomic Energy, CMS Marg, Mumbai-400039 ----Respondents S. B. CIVIL CONTEMPT PETITION No. 469 / 2006 Parmanu Vidyut Karamchari Union (CITU), through its Secretary son of Shri K. L. Choudhary, aged about 43 years, C-2/17, PH-II, Rawatbhata via Kota (Raj.) ----Petitioner Versus 1. Shri B S Verma, Income Tax Commissioner, Ward NO. 2, Income Tax Office, Near CAD Road, Kota. -3- [CW6394/2006] 2. Shri C. P . Jain, Site Director, RAPS, Plant Site, Rawatbhata, P . O. Anushakti, Via Kota (Raj.) ----Respondents S. B. CIVIL CONTEMPT PETITION No. 99 / 2007 Mohan Lal Rathore son of Shri Mangi Lal Rathore, aged about …...by caste Teli, resident of Kumhar Mohalla, Rawatbhata, District Kota- 323305. ----Petitioner Versus 1. Shri B S Verma, Income Tax Commissioner, Ward NO. 2, Income Tax Officer, Near CAD Road, Kota. 2. Shri Hari Singh, Income Tax Officer, Ward-1 (2), Kota. 3. Shri C. P . Jain, Site Director, RAPS, Plant Site, Rawatbhata, P . O. Anushakti, Via Kota (Raj.) ----Respondents _________________________________________________ For Petitioner(s) : Mr. Suresh Kashyap and Mr. Yogesh Kumar Sharma, advs. For Respondent(s) : Mr. Dharmendra Jain for NPCIL, Ms. Pariniti Jain for Income Tax Deptt. Mr. Tarun Kumar Verma, advs. _________________________________________________ HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI Judgment / Order 30/01/2017 The petitioner has preferred this writ petition making the following prayers:- “The contempt petition may kindly be allowed and the respondents/contemnors may be held guilty for committing contempt of order of the learned Single Judge and thy may be punished severely for non-compliance of judgment of the Hon’ble Court as per the PROVISIONS OF THE Contempt of Court Act. -4- [CW6394/2006] The petitioner further prays in the interest of justice that suitable direction may be given to the respondents/contemnors to make compliance of the interim order dated 22/8/2006 passed by the learned Single Judge in S. B. Civil Writ Petition No.6394/2006 forthwith with all consequential benefits including cost of this petition. Any other order or direction which the Hon’ble Court may consider just and proper in the facts and circumstances of the case may also kindly be passed in favour of the petitioner“ The brief facts of the case as noticed by this Court are that the members of petitioners Union were the employees of the Department of Autonomic Energy, Government of India. Vide Memorandum dated 4/9/1987, Government of India established a new autonomous body namely ‘Nuclear Power Corporation’ and the employees working in the department automatically were sent on deputation and these employees remained on deputation till 31/121997. From 1/1/1998 technical resignation was given by these employees and their absorption was completed in NPCIL. Until 1/1/1998 the petitioners remained as deputationists. Clause ‘C’ of Clause 3.6 of the Memorandum entitled the employees to receive gratuity or pension as admissible to the Staff or their families under the Rules applicable. These employees remained in pro rata category and the services rendered upto date of absorption the gratuity was payable as per the provisions of C.C.S. (Pension) Rules, 1972. The counsel for the petitioner has averred that the respondents have withheld the payment of gratuity without consent of the concerned employees for a period of 7 years, even without any provision in law. The Clause 3.1.4 of the offer of the absorption in NPCIL as reproduced by the petitioners is as under:- -5- [CW6394/2006] “The amount of retirement gratuity admissible to them shall remain with the government for a period of seven years and earn interest (taxable) at the rate prescribed for General Provident Fund deposits from time to time for the above period. The same shall be paid to the employee on the expiry of a period of 7 years from time the date of permanent absorption. In the case of those who opt for settlement of pensionary benefits under para 3.1.1.(b) above the period of seven years from shall commence from the date. The amount, however, can be paid earlier in the event of death/ retirement/ resignation/ discharge from service” Thus, the Clause 3.1.4 clearly mentioned the amount of gratuity was to remain with the Government for the period of 7 years and earned interest shall accrue at the rate prescribed for General Provident Fund deposits from time to time for the period. The petitioners Union made a representation to the NPCIL on 21/12/02004 stating therein that as per Section 10 15 (IV) (I) of the Income Tax Act, the amount of gratuity is not taxable, whereas the respondents have deducted @ 10% tax against the said amount of employees. As per Section 194-A (VI) of the Income Tax Act certain payments of interest which are subject to representation of taxpayers and as per the petitioners’ tax was not payable on the deposit scheme for retired Government employees. The petitioners-employees on being aggrieved of such deduction have challenged the deduction and also decision of the respondents to withhold the amount of gratuity for 7 years. The respondents have filed a detailed reply and stated that they are not deducting any income tax on the delayed -6- [CW6394/2006] payment of gratuity of the members of the Union. Section 192 of Income Tax Act is under chapter 17 and under Subject ‘B’. It deals with the collection and recovery of the tax. Section 192 provides that any person who is responsible for paying income chargeable under salaries shall at the time of payment deducted pay income tax on the amount payable at the average of the tax computed on the basis of rates raised in orders. It was stated in the reply that the petitioners Union had agreed at the time of option of the absorption with the Nuclear Power Corporation which is a Government of India enterprises to the condition of interest income earned being made taxable. However, even if, there was no agreement then also the deduction of tax at source was mandatory for employer as no agreement was enforceable against the statute. The respondents also stated that the amount of retirement gratuity was admissible but they remained with the Government for a period of 7 years and the earned interest (taxable) at the rate prescribed for General Provident Fund deposits from time to time for the above period was on account of approval of the same by the petitioners Union. It was also submitted by the respondents that the agreement clearly postulated retirement gratuity to remain with the Government for a period of 7 years and lieu of said representation Government was under obligation to pay this fund to the members petitioners Union at the rate prescribed for the General Provident Fund from time to time. The accumulated fund which was to be with the Government until 7 years was to be paid by to such employees and the same was earned interest at the rate prescribed for the General Provident Fund. -7- [CW6394/2006] Learned counsel for the petitioner Mr. Suresh Kashyap pointed out the judgment in the case of S. S. Miranda Ltd. Vs Shyam Bahadur Singh passed by the Calcutta High Court [reported in Factories Journal Reports Vol. 67 Page 162], the relevant portion of which is as follows:- “The case of the respondent is that the respondent was entitled to get payment under the decree and there was no scope for deduction of income-tax from the amount that was directed to be paid. Reliance was placed for this proposition on the case of All India Reporter Limited v. Ramchandra D. Datar [1961] 41 ITR 446 (SC), wherein it was held that where an employee obtains a decree for arrears of salary, compensation for wrongful termination of service and salary due for the period of notice and also interest and costs, there was no scope for applying the provision for deduction of income-tax at source. The amount was payable as \"judgment- debt\" and not as \"salary\" and the judgment-debtor could not claim to deduct income-tax payable as salary. In view of this well settled principle, the respondent is entitled to succeed in this appeal and the appeal must fail.” Learned counsel for the petitioners also argued that the respondents had in fact returned the amount in some of the cases by referring to the income of the particular assessment year whereby the interest payable and refund due to the employees was termed in accordance Section 143 (1) of the Income Tax Act, 1961. It is also argued by the learned counsel for the petitioners that employees of the Union were not a party in agreement between two departments and withholding of the gratuity for 7 years was per se illegal and the if the gratuity would have been paid at the time of absorption then no question would have arose to deduct any tax at the interest so accrued. Counsel for the petitioners further drew attention of the Court to the representation made by the Union taking up of the -8- [CW6394/2006] cause of said deposits to be repaid with interest and the income tax recovery of T.D.S. being imposed. It was stated in the representation that Section 10 sub Section 15 (IV) (I) of the Income Tax Act clearly postulated that there was no income tax payable on the said amount. However, the petitioners in their earlier representations have not protested the withholding of the gratuity for a period of 7 years by the respondents-department. After hearing the counsel for both the parties and perusing the record of the case as well as precedent law cited, this Court is of the opinion that the petitioners-employees had right of payment of the retirement gratuity admissible to them to be withheld by the Government for 7 years and in lieu of that they were entitled to have interest at the rate prescribed for General Provident Fund deposits from time to time. It is note worthy that the Clause 3.1.4 as reproduced in this Judgment as well as in para 6 of the writ petition clearly stipulate that the interest earned upon the retirement gratuity for a period of 7 years shall be taxable and, therefore, it would not be open for the petitioners to seek any kind of exemption from the tax interest so payable. It is also important to note that the tax was not being charged upon the gratuity and in fact the tax was being charged upon the interest income which were earned by the members of the employees Union and, therefore, the deduction at source was supported by law. The amount of gratuity remained for 7 years with the Government as decided by the agreement on 24/4/1997 and, therefore, it was not open for the petitioners to protest against the decision of the Government to retain the gratuity for a period of 7 years. -9- [CW6394/2006] The respondents have also made a categorical reply in para 3 of their reply stating that the petitioners Union themselves agreed at the time of option of absorption with the Nuclear Power Corporation to allow the Government to retain the retirement gratuity for a period of 7 years and then the same become payable alongwith the earned interest (taxable) at that time. Thus, it was not open to the petitioners to challenge the approval of withholding the retirement gratuity for a period of 7 years. Moreover, withholding of such gratuity for a period of 7 years had to accrue to the employees with the earned interest which was taxable at the rate prescribed as per the agreement itself. Thus, it is clear case where the petitioners Union employees and all the employees were given a common benefit of retirement gratuity after 7 years alongwith earned interest. No tax was chargeable on the gratuity in accordance with law and only tax was charged upon the interest that accrued upon the retirement gratuity and which is chargeable under the law as well as supported by the agreement’s Clause 3.1.4 of the offer of absorption in NPCIL. The precedent law would not apply in this case because it is dealing with the arrears of salary and pension for wrong termination where the employee did not have the option or was party to such termination. The Clause 3.1.4 of the absorption in the NPCIL has stated to be approved by the Union of the employees in the reply and was sufficient to make the interest taxable and any order of refund made under Section 47 of the Income Tax Act would not come to help of the petitioners because it was always the prerogative of the respondent department to see as to whether the employees had disclosed the income from the interest earned. And after interest from the income was disclosed the same was -10- [CW6394/2006] definitely liable to be taxed. In light of the aforementioned discussions, this case does not call for any indulgence. The writ petitions are accordingly dismissed. The contempt petitions as well as both the applications in these matters are also dismissed in light of the judgment so passed. A copy of this judgment be placed in each of the writ petitions. (DR. PUSHPENDRA SINGH BHATI)J. K Kumawat Jr. P. A. "