1985 (1) TMI 42 - HC - Income Tax

Summary

Issues Involved:

1. Legality of termination of the petitioner's employment.
2. Validity of the award by the Industrial Tribunal.
3. Compliance with the Supreme Court's consent order.
4. Deduction of income tax by the respondent company.
5. Entitlement to interest on the withheld amount.
6. Entitlement to compensatory costs.

Issue-wise Detailed Analysis:

1. Legality of Termination of the Petitioner's Employment:
The appellant-petitioner, employed as an Assistant Development Engineer, had his services terminated by the respondent company in June 1970. The petitioner challenged this termination under Section 33A of the Industrial Disputes Act, 1947, before the 4th Industrial Tribunal. The Tribunal set aside the termination and directed reinstatement with half back wages.

2. Validity of the Award by the Industrial Tribunal:
The respondent company contested the Tribunal's award by filing an application under Article 226 of the Constitution, which was initially stayed but later upheld by the High Court. The respondent's subsequent appeal was dismissed, and a special leave petition was filed in the Supreme Court. A compromise was reached, leading to a consent order by the Supreme Court, which substituted the High Court's judgment.

3. Compliance with the Supreme Court's Consent Order:
The Supreme Court's consent order required the respondent company to pay Rs. 1,50,000 to the petitioner without any deductions. Instead, the respondent company deducted Rs. 78,279 as tax and Rs. 4,520.60 for other charges, paying only Rs. 67,200.40 directly to the petitioner. The petitioner demanded the balance, leading to further legal proceedings.

4. Deduction of Income Tax by the Respondent Company:
The High Court ruled that the respondent company was not entitled to deduct income tax at source from the Rs. 1,50,000 as directed by the Supreme Court. The court noted that the entire sum could not be considered salary income and should not have been taxed without proper allocation. The court directed the Income-tax Department to refund the deducted tax to the company for payment to the petitioner.

5. Entitlement to Interest on the Withheld Amount:
The court determined that the petitioner was entitled to interest on the withheld amount of Rs. 82,799.60 from April 1, 1980, to August 9, 1983, at a rate of 12%, and on the remaining Rs. 20,377.60 from August 10, 1983, until payment. The court referenced the Supreme Court's judgment in Mahendra Singh Dhantwal v. Hindustan Motors Ltd., emphasizing that the company should bear any tax liability and pay the full amount without deductions.

6. Entitlement to Compensatory Costs:
While the petitioner sought compensatory costs, the court did not award them due to the petitioner's failure to disclose the tax refund from the Income-tax Department. The court noted that both parties had acted improperly, leading to the decision not to award costs to either party.

Conclusion:
The respondent company was directed to pay the remaining balance of Rs. 20,377.60 with interest within four weeks. The court stayed the proceedings under Article 226 for five weeks, allowing the respondent company to comply with the payment order. The court's decision emphasized that the consent order from the Supreme Court required full payment without deductions and that the respondent company's actions were not justified. The appeal was disposed of without costs, and the parties were instructed to act on the signed copy of the order.