1976 (12) TMI 1 - SC - Income Tax

when the sanction for the additional dearness allowance either by unilateral decision or by bilateral settlement has taken place after the appointed day that the question of additional dearness allowance as provided in s. 2(b) of the act will arise

Summary

Issues Involved:
1. Whether the increased Dearness Allowance (D.A.) sanctioned after the appointed day under the Additional Emoluments (Compulsory Deposit) Act, 1974.
2. The base rate for calculating additional D.A. for future deductions.
3. The significance of the settlement date versus the award date in determining the sanction of D.A.

Issue-wise Detailed Analysis:

1. Whether the increased Dearness Allowance (D.A.) sanctioned after the appointed day under the Additional Emoluments (Compulsory Deposit) Act, 1974:

The appellants argued that the increased D.A. to 100% of the Ahmedabad Rate was sanctioned after the appointed day (6th July 1974) when the awards were made between August and September 1974, pursuant to the settlement of June 28, 1974. They contended that the difference between the increased D.A. and the prevailing rate payable in arrears from January 1, 1974, to June 30, 1974, constituted additional D.A. under section 2(b) of the Act, subject to a 50% deduction.

The court rejected this contention, stating that the settlement of June 28, 1974, which fixed the D.A. at 100% of the Ahmedabad Rate with effect from January 1, 1974, was the relevant sanction date. The court emphasized that the sanction must have relevance to the reality of the transaction between the parties. Since the settlement was prior to the appointed day, the additional D.A. could not be said to be sanctioned after the appointed day.

2. The base rate for calculating additional D.A. for future deductions:

The appellants claimed that for future deductions of additional D.A., the base rate should be 95% of the Ahmedabad Rate, as per the interim award of June 21, 1974. They argued that the workers should be treated as if they were receiving D.A. at 95% of the Ahmedabad Rate prior to the appointed day, making 2.5% (50% of the 5% difference between 95% and 100%) liable for deduction under the Act from July 6, 1974.

The court did not accept this argument, stating that the settlement of June 28, 1974, which had retrospective effect from January 1, 1974, was the relevant sanction. Since the settlement was prior to the appointed day, the increased D.A. to 100% of the Ahmedabad Rate was not subject to the deductions stipulated by the Act.

3. The significance of the settlement date versus the award date in determining the sanction of D.A.:

The appellants argued that the settlement during the pendency of an industrial dispute before the Industrial Court had to be approved by the court to be considered sanctioned under section 2(b). They referred to section 115A of the Bombay Industrial Relations Act, 1946, which requires the Industrial Court to make an award in terms of the settlement unless certain conditions exist.

The court held that once the Industrial Court approved the settlement and passed awards in its terms, the awards came into operation retrospectively from January 1, 1974. The sanction of the awards was, therefore, the sanction under the settlement, which was prior to the appointed day. Thus, the increased D.A. could not be considered sanctioned after the appointed day.

Conclusion:

The court concluded that the increased D.A. to 100% of the Ahmedabad Rate was sanctioned by the settlement of June 28, 1974, which was prior to the appointed day of July 6, 1974. Therefore, the additional D.A. was not subject to the deductions under the Act. The appeal was dismissed with costs, affirming the High Court's decision.