2024 (11) TMI 29 - HC - Income Tax

Deduction of tax from out of the salary arrears which is appropriated for transfer to pension corpus set up in terms of appropriate pension regulations - Constitutionality of Explanation to Section 17 (2) (ii)(c) of the Income Tax Act 1961 and para 2 of Circular bearing Ref.FD/HOAT/CIR dated 02.03.2011 read with Circular bearing reference FD/01/2010 dated 06.01.2010 issued by the 4th respondent - HELD THAT - There is no dispute on the position that the issue raised in these writ petitions is identical to the one considered 2019 (9) TMI 1118 - MADRAS HIGH COURT in W.P.No.8101 of 2011 by order dated 06.09.2019 and hence the contents of that order may be read as part and parcel of the present order as well. The liberty granted at paragraph 7 as in that matter is extended to the present petitioners herein as well. Petitioner states that the petitioner will make requests before the authorities for determination of the rate of tax deduction, if any, within four weeks from the date of receipt of this order and they are permitted to do so. Upon receipt of the requests, the petitioners shall be heard and their representations will be decided in accordance with law within a period of six weeks from the date of receipt of the representations. Since in the present matter as well, there is an interim injunction which is presently in force, the injunction shall continue till 15th April 2025 or disposal of the representations whichever is earlier. Writ petition disposed in terms of this order. The only distinction in W.P.No.8564 of 2011 is that the issue relates to house rent allowance (HRA) arising from a bipartite settlement between the employees and the Punjab National Bank. As the position in law is identical to the other writ petitions, the same direction above.

Summary

Issues:
- Tax deduction from salary arrears for transfer to pension corpus
- Constitutionality of Explanation to Section 17(2)(ii)(c) of the Income Tax Act 1961
- Double taxation issue
- Application of Section 197 for deduction at nil/lower rate
- Extension of interim injunction on tax deduction

Analysis:
1. The judgment addresses eight writ petitions filed by various bank associations concerning tax deduction from salary arrears meant for transfer to pension corpus. The petitions seek declarations or mandamus due to grievances over tax deductions. One petition specifically challenges the constitutionality of certain sections of the Income Tax Act 1961 and related circulars.

2. The court refers to a previous case involving the Indian Overseas Bank Employees' Union, where a similar issue was raised regarding pension regulations and tax deductions. The court emphasizes the legality of tax deductions and the availability of mechanisms under the Income Tax Act, such as Section 197, for applying for lower or nil deduction certificates.

3. The judgment highlights the importance of following the statutory provisions and advises petitioners to seek relief through appropriate authorities for lower tax deductions. The court grants time for the petitioners to make their requests and ensures a timely decision within six weeks of receiving representations.

4. An interim injunction, initially granted in 2011, restraining banks from tax deductions is extended until the disposal of the representations or a specified date. The court maintains consistency in its approach across the writ petitions, emphasizing the need for petitioners to follow due process under the law.

5. The judgment concludes by disposing of the writ petitions based on the orders outlined, with no costs imposed. The legal representatives for the petitioners and respondents are identified, and the court ensures that the liberty granted in previous orders extends to the current petitioners as well.

6. Overall, the judgment provides a detailed analysis of the tax deduction issue, the application of relevant legal provisions, and the extension of interim relief, ensuring clarity and guidance for the petitioners in seeking redressal through proper channels.