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2008 (2) TMI 375 - HC - Income Tax


Issues:
1. Whether the Corporation can deduct income-tax from the gratuity amount paid under the Regulations?
2. Whether the Corporation can deduct damage in terms of section 4(6) of the Act?

Analysis:

Issue 1:
The judgment addresses the question of whether the Corporation can deduct income-tax from the gratuity amount paid under the Regulations. The court examined the provisions of the Income-tax Act, specifically section 10 sub-section (10) clause (iii), which excludes gratuity amounts from total income up to a specified limit set by the Central Government. The court noted that the protection of exclusion applies to all cases of gratuity payment, regardless of whether it is paid under the Act or Regulations. The judgment found that the Corporation's deduction of income-tax from the gratuity amount was contrary to the provisions of the Income-tax Act. The court rejected the contention that income-tax deduction is applicable only to gratuity paid under the Act and not under the Regulations.

Issue 2:
Regarding the deduction for damages, the court referred to section 4(6) of the Act, which allows for the forfeiture of gratuity in cases where an employee's actions cause damage to the employer's property. The judgment mentioned that in this case, the Corporation issued a notice to the workman for causing damage to the property, quantified at Rs. 25,000. As per the provisions of section 4(6), the Corporation was empowered to deduct this amount from the gratuity. Therefore, the court allowed the Corporation to deduct the damage amount of Rs. 25,000 from the gratuity. However, the court ruled that the deduction of income-tax from the gratuity amount was not justified. The writ petition was partially allowed for the deduction of damages but dismissed in all other respects.

In conclusion, the judgment clarified the legal aspects of income-tax deduction from gratuity amounts and the Corporation's authority to deduct damages from gratuity payments based on the relevant provisions of the Income-tax Act and the Payment of Gratuity Act.

 

 

 

 

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