2021 (7) TMI 344 - HC - Income Tax

Deduction of TDS on the amount paid and payable to the workmen being the members of the first respondent - The workmen were made entitled for certain payment consequent upon the closure of the Industry - Single Judge took up the issue of due payment is to be construed as a special package coming under the second proviso to Section 10(10B) of the Income Tax Act as against the case sought to be projected by the appellant that it would come under Section 10(10C) being the Voluntary Retirement Scheme - HELD THAT - Though the learned counsel appearing for the appellant seek to contend that the case on hand would come under Section 10(10C) of the Income Tax Act, in which case, the amount quantified is only the Voluntary Retirement payment, we do not subscribe to the said view expressed. Incidentally, the learned counsel appearing for the appellant submitted that if it is a case under first proviso to Section 10(10B) of the Income Tax Act, there is a cap with respect to the amount quantified - ₹ 50,000/-. This will only militate against the members of the first respondent. The said contention also, in our considered view, cannot be countenanced. As rightly submitted by the learned Senior Counsel appearing for the first respondent, it is a case of the first respondent/writ petitioner that the case would fall under the second proviso. We do not find any perversity in such a finding rendered by the learned Single Judge.Therefore, the interpretation given has to be accepted with respect to the nomenclature of the Scheme. Though it is referred as Voluntary Retirement Scheme, one has to see the object and intent behind it. When once a factual finding is given that it is a special package, a different view is not possible. We may note that the case on hand involves a chequered history with respect to the running of Industry qua rights of the workmen. Therefore, this is not a case of voluntary retirement by the workmen, but, on the other hand, brought forth by contingency. Therefore, the reason of the learned Single Judge bringing the case under the second proviso is perfectly in order. We have no hesitation in confirming the order of the learned Single Judge.

Summary

Issues:
Challenge to orders on TDS deduction for workmen payments; Interpretation of Income Tax Act sections 10(10B) and 10(10C); Applicability of first and second provisos to TDS deduction; Dispute over TDS deduction by Income Tax Department; Special package for workmen payments; Judicial review of Single Judge's order.

Analysis:
The appeals challenge orders on TDS deduction for payments to workmen following Industry closure. The issue revolves around whether the payments constitute a special package under the Income Tax Act. The Single Judge held that the payments are a special package, not a Voluntary Retirement Scheme, thus subject to the second proviso of Section 10(10B) rather than Section 10(10C).

The Income Tax Department sought TDS deduction on the payments, leading to a dispute. The Division Bench noted the Department's claim but ultimately ruled that TDS would not be applicable in this case. The Department's right to challenge the finding was acknowledged, and a direction was given to deposit the TDS amount in an ESCROW Account.

The Government's Special Leave Petition against the Single Judge's order was dismissed, upholding the finding that the payments qualified for exemption under the first proviso of Section 10(10B). The Single Judge's detailed analysis concluded that the payments were compensation approved by the Central Government, falling under the second proviso and exempt from income tax.

The Court affirmed the Single Judge's order, emphasizing the special protection provided by the Government to the workmen. The history of the Industry and the circumstances leading to the payments supported the interpretation of a special package. The decision was deemed well-merited, and no interference was warranted.

In conclusion, the writ appeals were dismissed, and no costs were awarded. The Registry was directed to release a certain amount for the benefit of the workmen, as an interim measure. The judgment confirmed the Single Judge's orders, emphasizing the importance of the special package for the workmen and the validity of the interpretation under the Income Tax Act.