1984 (8) TMI 3 - SC - Income Tax

SC directed appellant company to pay lumsum to dismissed workman towards compensation for back wages, and future wages in lieu of reinvestment - held that workman is entitled to claim relief u/s 89

Summary

Issues:
Calculation of compensation in lieu of reinstatement and back-wages, Deduction of income tax from the compensation amount, Application of Section 89 of the Income Tax Act, 1961 for relief, Clarification on the obligation of the employer to deduct income tax, Directions for the appellant to assist the workman in claiming relief under Section 89, Disposal of the appeal and application for clarification.

Calculation of Compensation:
The Supreme Court heard arguments from both counsels regarding the appropriate compensation for the respondent in lieu of reinstatement. After examining the calculations provided, the court ordered the appellant to pay Rs. 2,25,000 to the respondent within two weeks. This amount included interest, costs, back-wages, and compensation in lieu of reinstatement. The compensation was spread over the period from 1970 to 1989 to cover back-wages and future wages that should have been paid annually.

Deduction of Income Tax:
The appellant's counsel raised the issue of deducting income tax from the compensation amount as per the Income Tax Act, 1961. The court clarified that the compensation awarded was in lieu of back-wages and future wages, to be spread over the mentioned period. The court directed the respondent to seek relief under Section 89 of the Income Tax Act with the assistance of the appellant and its income-tax consultants. The court emphasized the obligation of the employer to deduct income tax and deposit it with the relevant authority.

Application of Section 89 for Relief:
The court emphasized that the respondent was fully entitled to relief under Section 89 of the Income Tax Act. It directed the respondent to apply for relief under Section 89 with the help of the appellant and its consultants. The court instructed the Income Tax Officer to grant immediate relief under Section 89 within three months to implement the judgment without delay and relieve the respondent from the burden of unemployment since 1970.

Clarification and Directions:
The court clarified that the compensation amount should be spread over the mentioned period and that the relief under Section 89 was essential. It rejected the alternative submission regarding payments to the Central Government in case of delay in relief grant. The clarification provided was deemed an integral part of the main judgment and order dated August 7, 1984. The application for clarification was disposed of with these directions.