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TMI Blog2017 (3) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... o.18566 of 2015, is taken as the lead case. The petitioner therein is a registered trade union and a recognised Union of HPF, a public sector undertaking wholly owned by the Central Government. The petitioner represents 70 workmen out of the total 700 workmen and officers, who are regular employees of the HPF. It is submitted that more than 3800 of the total 4500 employees, have left employment under the Voluntary Retirement Scheme (VRS) announced by the Management periodically from 1991. The petitioner challenges the Voluntary Retirement Scheme announced by the respondents, dated 20.03.2014 and the circular dated 21.03.2014, as unfair and illegal and seek for consequential reliefs of payment of 72 months salary on the 2007 pay scales to each employee; arrears of pay on 2007 pay scales to each employee; not to deduct income tax on the severance package payable under the Voluntary Retirement Scheme; not to deduct the recoverable monthly advance, Special Performance Allowance and adjustable advance paid to the employees and permit the employees to occupy the staff quarters till 01.05.2016, at the same rate of rent, charged until Voluntary Retirement Schemes. Out of the above conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... men of HPF were not granted revision of pay, since 1987 while their counter parts working in other public sector undertakings (PSUs), had received benefits of pay revision periodically upto 2007. The settlements which were entered into with the Management under Section 12(3) and 18(1) of the Industrial Disputes Act, (I.D., Act), with regard to payment of 20% of the salary as advances, which can be adjusted only against arrears payable upon revision of pay. However, on account of accumulation of repayable monthly advance, which had reached unbearable levels, a settlement was entered into between the workmen and the Management of HPF on 19.08.2009, agreeing to discontinue the repayable monthly advance from August 2009 and whatever was paid to them between September 2002 and July 2009, could be adjusted against the pending arrears of wage revision due and payable to the Workmen. Another settlement was arrived at on 19.08.2009, by virtue of which the workers were to be paid Special Performance Allowance equivalent to 20% of the salary and such payment to continue till the revival proposal submitted to the Government of India by HPF. The workmen as well as the Management of HPF were str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., (HPF), Udhagamandalam, Tamil Nadu. Sir, The undersigned is directed to convey the approval of the competent authority to the following: (i) Implementation of VRS at 2007 notional pay scales without any arrears as one time relaxation of DPE guidelines for all the employees of HPF and providing a sum of Rs. 181.54 crore in the form of Non-Plan loan from the lump sum provision for implementation of Voluntary Retirement Scheme and Statutory Dues'. (ii) Settlement of all outstanding recoveries of recoverable/adjustable advances/special performance allowance paid to employees in the past which are not covered under DPE guidelines, out of VRS dues as stated above subject to vacation of interim stay by Hon'ble High Court of Madras. (iii) To waive recoveries of such recoverable/adjustable advances/special performance allowance in respect of employees who have superannuated/left the company prior to implementation of this enhanced VRS proposal. (iv) To take further action for closure of the Company as per recommendations of BRPSE in their meeting dated 28.06.2013. 2. The financial sanctions for the above wherever required will be issued separately. 3. This issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... men were superannuated, 3 passed away without receiving compensation and were paid only the statutory dues after recovering all the allowances. During January 2015, nearly 340 employees were given VRS compensation after deducting all the advances and income tax and the maximum amount to those with 30 years or more service at the rate of 60 days wages multiplied by the number of completed years of service or salary for the remaining years, whichever is less. The scheme was extended by order dated 25.02.2015, and further extended on 13.03.2015 and 26.03.2015. In the mean time, the employees represented for exemption from income tax. The learned Senior counsel would submit that though the scheme is called as a VRS, it is only a closure compensation scheme as VRS can be implemented in respect of surplus staff or staff who are not required for the establishment and the establishment would continue to operate with the required number of staff. Therefore, the workmen have to be compensated by paying them compensation calculated in terms of the ID Act, when closure of an establishment is ordered. To buttress the said submission, reference was made to the letter of the Director of the Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment that taxes are liable to be deducted at source in accordance with Section 10(10C) of the Income Tax Act, 1961 (IT Act) is not tenable, as the employees are exempted from paying income tax in terms of Section 10(10B) of the IT Act, as the compensation is received by the Workmen, pursuant to a notification issued by the Central Government, which is in the nature of special protection to the Workmen and as such, the monetary limit provided under proviso clause 2(i) of Section 10(10B), of the IT Act would not apply. It is further submitted that it is a case of closure followed by winding up of the company and therefore, the package offered is a severance of employment and therefore, it is a severance package and not a retirement package, as there is termination of employment and there is no option left to the employee. The Central Government was also conscious of the decision to close down the establishment which was recorded by the Court in W.P.Nos.24417 & 19640 of 2005, dated 29.08.2016, wherein the Court has recorded that the Government of India on 20.03.2014, has taken a decision to close down the company. Therefore, it is submitted that since the industry has been closed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to the contention raised by the petitioners that they have accepted the benefit under the VRS without prejudice to their rights, the said expression without prejudice depends upon the context in which it is used and in the present circumstances, the use of expression 'without prejudice', cannot mean that the employees can seek for a totally different relief having accepted the VRS package. To support such contention, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Tarapore & Company vs. Cochin Shipyard Ltd., Cochin & Anr., reported in AIR 1984 SC 1072. Further, it is submitted that whatever the statutory dues including income tax, which is payable on the acceptance of the package given under the VRS scheme has to be remitted and tax has to be deducted at source in terms of Section 10(10C) of the IT Act. 13. Mr.J.Narayana Swamy, learned Senior counsel appearing for the Income Tax Department referred to the decision of the Hon'ble Division Bench of this Court in case of CIT vs. S.K. Sundararamier & Sons. reported in 1999-240-ITR-740 (Mad), and submitted that the persons, who are bound under the IT Act to deduct income tax at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual assessment, but a case where no tax is liable to be paid in terms of Section 10 of the IT Act. 15. By way of reply, the learned Additional Solicitor General of India, submitted that the present argument of the petitioners cannot be tested in a Writ Petition and the question as to whether, it is a retrenchment or not, is a mixed questions of fact and law which has to be agitated before appropriate forum. 16. Mrs.Rita Chandrasekar, learned counsel appearing for HPF, submitted that till date even those employees, who have opted for VRS and received the payments continued to occupy the quarters and the Management is unable to pay the charges towards electricity and other amenities and as of now, there is no electricity supply for the quarters during the day time and only skeleton lighting facility is available at night and those employees who have opted for VRS have to vacate the quarters and cannot continue to reside there. 17. Heard the learned counsels appearing for the parties and carefully perused the materials placed on record. 18. The challenge in these Writ Petitions, is to an order passed by the first respondent, dated 20.03.2014, and the consequential circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to rely upon the subsequent press release of the Government of India much after the press release given by the Central Government on 28.02.2014, which is with particular reference to the HPF employees. Therefore, reliance placed on the office memorandum and press releases issued during September 2016, cannot be relied on to test the correctness of the impugned proceedings and therefore, the same stands eschewed and this Court proceeds to consider the validity of proceedings/circular on the given facts and circumstances of the case. The petitioners contend that they are entitled to better terms in the said package i.e., to be paid 72 months' salary in the 1997 scale, together with arrears without any deductions towards income tax or other allowances. So far as the deduction of other allowances are concerned, the petitioners have succeeded in a Writ Petition filed challenging the same in W.P.No.24460 of 2013, etc, dated 29.11.2016. 19. The argument advanced by the learned Senior counsel for the petitioner contending that the package is not a VRS, but a case of a closure, at the first blush was found to be impressive. However, on a careful and close scrutiny of the facts and circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees have availed the VRS package and received the benefit after deductions towards allowances and TDS. The TDS which had been deducted, has been kept in a separate Escrow account pursuant to interim directions issued in these Writ Petitions. The VRS package has been made known to the employees by the impugned circular, dated 21.03.2014. 22. It is the case of the petitioners that there is no option available to the employees as the company has been closed down and therefore, the quantum which is sought to be given to the employees should be construed as a compensation for closure and they should be paid higher sums of money. In the considered view of this Court, this interpretation is wholly impermissible in the facts and circumstances of the case. Though the petitioners would state that there is no option available, there is not a single case filed by a employee, who has refused to accept the VRS and requested to be treated differently. The petitioners do not dispute the fact that VRS has been announced by the HPF Management periodically from the year 1991. These schemes were typical as VRS scheme where the employees left the employment, yet the employer continued to do its oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in these Writ Petitions do not flow from the main prayer in the Writ Petition, which is to quash the proceedings, dated 20.03.2014 and 21.03.2014. 24. Assuming that the declaratory relief is granted, the consequential relief cannot be granted, as it is independent of the declaratory relief. Therefore, assuming for the sake of argument, if the impugned circular is held to be illegal and unconstitutional, then the Court cannot direct the respondent to pay 72 months salary together with arrears as such quantum is liable to be paid only after an industrial adjudication takes place to declare that it is a closure and the procedure under the ID Act has to be followed. Therefore, this Court can safely conclude that the employees of HPF are in a quandary, on one hand, they wanted to leave the organisation, receive compensation, but on the other are not agreeable to accept the quantum of compensation fixed by the Central Government. However, such relief cannot be acceded to on the grounds raised by the petitioners. 25. As mentioned above, the package is a special package and regardless of the nomenclature or other surrounding factors, this package, if agreeable to be accepted by the emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is an option for the workmen to accept the package and such of those who do not wish to accept the package, consequences are bound to follow, which have to be met in accordance with law before the appropriate forum. 28. Having held so, the only other question that remains to be decided is with regard to deduction of tax at source. Section 10 of the IT Act falls in Chapter III and it deals with incomes not included in total income. Section 10 states that in computing the total income of a previous year of any person, any income falling within any of the clauses mentioned therein shall not be included. For the purpose of this case, sub-section (10B) & (10C) of Section 10 would be relevant, which are quoted herein below:- Incomes which do not form part of Total Income Incomes not included in total income. 10.In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included. S.10(10B) any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, in accordance with any scheme or schemes or voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme or voluntary separation, to the extent such amount does not exceed five lakh rupees]; Provided that the schemes of the said companies or authorities [or societies or Universities or the Institutes referred to in sub-clauses (vii) and (viii), as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be prescribed [***]: provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year:]. 29. The case of the revenue is that the package given to the workmen is a VRS package and it would fall within Section 10(10C)(viii) and accordingly, taxable if the receipt exceeds the exempted limit. The case of the petitioner is that the severance package received by them would fall within Section 10(10B) and shall not be included as income in computing total income of the employees. The contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso states that the first proviso shall not apply in respect of any compensation received by a workmen in accordance with any scheme, which the Government may, having regard to the need for extending the special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances, approve in its behalf. The compensation which is received by the workmen would fall within the definition of compensation found in explanation to Section 10(10B). 32. In such circumstances, this Court has no hesitation to hold that the package having been received by the workmen as compensation pursuant to the decision taken by the Central Government to offer special protection to the employees of HPF, the same stands exempted from deduction to income tax. 33. W.P.No.18608 of 2015; the petitioner in this Writ Petition is an association of officers working in HPF and the relief sought for by them is also identical. The yardstick applicable to workmen as defined under the Industrial Disputes Act, cannot be made applicable to the officers. Therefore, under normal circumstances whatever reasoning assigned by this Court in the preceding paragraphs would apply to the empl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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