2020 (6) TMI 108 - HC - Income Tax

TDS on amount appropriated towards the Pension Fund Corpus - sums paid by the fourth respondent Bank to the members of the petitioner Association towards salary and arrears of salary, pursuant to the provisions of the 9th Bipartite Settlement -fourth respondent Bank rejected the request of the petitioner Association for exclusion of 2.8 times of pay deducted towards pension fund gap, from the salary revision arrears paid to its members, who had opted for II option for pension, from the taxable income for the calculation of income tax pertaining to the financial year 2010-11 - HELD THAT - The petitioner Association is directed to submit a representation with respect to nil/lower deduction of income tax to the authorities concerned, within a period of four weeks from the date of receipt of a copy of this order. On such submission being made, the authorities concerned shall consider the same and pass appropriate orders, on merits and in accordance with law, after affording due opportunity of personal hearing to the petitioner Association within a period of four weeks thereafter. Till such time, the order of interim injunction already granted, shall stand extended.

Summary

Issues:
1. Quashing of order for tax deduction on Pension Fund Corpus
2. Exclusion of pension fund gap from taxable income
3. Interpretation of Income Tax Act regarding double taxation
4. Application of Section 197 for deduction at lower rate
5. Extension of interim injunction on tax deduction

Issue 1: Quashing of order for tax deduction on Pension Fund Corpus
The petitioner sought to quash the order passed by the fourth respondent Bank, which involved deducting tax at source on the amount appropriated towards the Pension Fund Corpus from the sums paid to the members of the petitioner Association. The Court considered the implications of this deduction and the legality of the order.

Issue 2: Exclusion of pension fund gap from taxable income
The petitioner Association requested the exclusion of the pension fund gap from the taxable income for the calculation of income tax pertaining to the financial year 2010-11. The Court analyzed the provisions of the 9th Bipartite Settlement and the Income Tax Act to determine the validity of this exclusion.

Issue 3: Interpretation of Income Tax Act regarding double taxation
The Court referenced a previous judgment where it was argued that taxing the pension amount again would result in double taxation. However, the Court emphasized the mechanism provided in Section 197 of the Income Tax Act for considering requests for nil or lower deduction rates, highlighting the need for proper application and assessment by the relevant authorities.

Issue 4: Application of Section 197 for deduction at lower rate
Section 197 of the Income Tax Act was pivotal in the judgment, as it provides for the issuance of a Certificate for deduction at a lower rate. The Court directed the petitioner Association to submit a representation for nil/lower deduction of income tax to the authorities concerned, emphasizing the importance of following the statutory provisions and seeking appropriate relief through the prescribed mechanism.

Issue 5: Extension of interim injunction on tax deduction
An interim injunction was granted earlier, restraining the banks from deducting tax at source until further orders. The Court extended this injunction until the disposal of the representation to be filed by the petitioner or until a specified date, ensuring that the status quo was maintained regarding tax deductions during the legal proceedings.

In conclusion, the judgment addressed the concerns raised by the petitioner regarding tax deductions on the Pension Fund Corpus, highlighting the importance of following the provisions of the Income Tax Act, specifically Section 197, for seeking relief from tax deductions. The Court provided a clear directive for the petitioner to submit a representation for consideration by the authorities concerned, ensuring a proper legal process for addressing the issue of tax deduction on pension funds.