2019 (9) TMI 1118 - HC - Income Tax

Certificate for deduction at lower rate u/s 197 - Petitioner make its plea for nil/lower deduction for consideration by the appropriate Authorities - HELD THAT - Learned counsel for the petitioner on its behalf states that it will file its request before the authorities within two weeks. It is permitted to do so. Such request, if made before the Authorities concerned, within two weeks from today will be considered after hearing the petitioner union and decided in accordance with law within a period of six (6) weeks from date of conclusion of personal hearing in any event on or before 15th of November 2019. This Court, vide an interim order dated 13.06.2011 has extended until further orders an injunction granted on 29.03.2011 restraining the banks from deducting tax at source until further orders. The Court has also noticed that in such cases where the deduction was not effected, then the respondents are restrained from effecting the same and in cases where the deductions have been effected amounts equal to tax shall not be disbursed and shall be retained in the custody of the bank itself. In the light of the fact that the injunction has been in force since 2011, the same shall continue till the disposal of the representation to be filed by the petitioner or till the 15th of November, 2019 whichever is earlier.

Summary

Issues:
1. Pension scheme under the Indian Overseas Bank Employees Pension Regulations, 1995.
2. Second option of pension for employees who did not opt initially.
3. Taxation on the pension amount.
4. Request for nil deduction under Section 197 of the Income Tax Act.

Analysis:
1. The petitioner, a Union affiliated with NCBE, challenged the pension scheme introduced by the Indian Overseas Bank in 1995. A settlement was reached for a second pension option for employees who initially did not opt for the scheme, requiring a contribution towards a shortfall in the pension fund.

2. An agreement between IBA and UFBU in 2009 provided for the second pension option, necessitating a contribution from employees. Tax was deducted at source on the arrears payable to employees who opted for the second pension. The petitioner argued against double taxation on the pension amount.

3. The Court declined to address the petitioner's plea for nil deduction, citing the mechanism under Section 197 of the Income Tax Act for such requests. Section 197 allows for a Certificate of deduction at a lower rate, providing a process for assessing officers to justify lower or no deduction of income tax.

4. The Court directed the petitioner to file a request for nil/lower deduction before the appropriate authorities within two weeks. The authorities were instructed to consider the request after a personal hearing within six weeks from the conclusion of the hearing or by November 15, 2019. An interim injunction was extended to prevent tax deduction at source until the disposal of the representation or November 15, 2019, whichever is earlier.

5. The writ petition was disposed of with no costs, emphasizing the need for the petitioner to follow the prescribed procedure under Section 197 for addressing the taxation issue related to the pension scheme.