Mohan Lal Rathore Son Of Shri Mangi Lal Rathore, By Caste Teli,Resident Of Begu, Tehsil Begu, District Kota v. Union Of India- Through Commissioner, Income Tax Department, Ward

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S. B. CIVIL WRIT PETITION NO.6394/2006 Mohan Lal Rathore son of Shri Mangi Lal Rathore, by caste Teli,resident of Begu, Tehsil Begu, District Kota. ----Petitioner Versus 1.Union of India- through Commissioner, Income Tax Department, Ward NO. 2 Government of India, Income Tax Office, Near CAD Road, Kota.Department, Ward NO. 2 Government of India, Income Tax Office, Near CAD Road, Kota. 2.Income Tax Officer, Department Of Income Tax, Ward-1 (2), Kota.Kota. 3.Site Director, RAPS 1 to 6, RAPS, Plant Site, Rawatbhata, P. O.Anushakti, Via Kota (Raj.)Anushakti, Via Kota (Raj.) 4.Deputy Secretary, Government of India, Department of Atomic Energy, CMS Marg, Mumbai-400039Atomic Energy, CMS Marg, Mumbai-400039 ----Respondents Connected With S. B. CIVIL WRIT PETITION NO.1129/2005 Parmanu Vidyut Karamchari Union (CITU), through its Secretary sonof Shri K. L. Choudhary, aged about 43 years, C-2/17, PH-II, Rawatbhata via Kota (Raj.) ----Petitioner Versus 1.Union Of India – through Deputy Secretary, Government of India, Ministry of Personal, Public Grievances & Pensions, 6[th]Floor, Nirvachan Sadan, New Delhi. India, Ministry of Personal, Public Grievances & Pensions, 6[th]Floor, Nirvachan Sadan, New Delhi. 2.Site Director, RAPS 1 to 6, RAPS, Plant Site, Rawatbhata, P. O.Anushakti, Via Kota (Raj.)Anushakti, Via Kota (Raj.) 3.Income Tax Department, Ward NO. 2 Government of India, Income Tax Office, Near CAD Road, Kota.Income Tax Office, Near CAD Road, Kota. -2- 4.Deputy Secretary, Government of India, Department of Atomic Energy, CMS Marg, Mumbai-400039Atomic Energy, CMS Marg, Mumbai-400039 ----Respondents S. B. CIVIL WRIT PETITION No.2159/2005 Parmanu Vidhyut Karamachari Union (CITU) through its AssistantPublic Secretary, Goverdhan Lal Verma S/o Shri Latur Lal, agedabout 45 years, Resident of T-1 to 5, ESL (Anu Deep Colony) P. O.Bhabha Nagar, Rawatbhata, Via Kota. ----Petitioner Versus 1.Union Of India – through Deputy Secretary, Government of India, Ministry of Personal, Public Grievances & Pensions, 6[th]Floor, Nirvachan Sadan, New Delhi. India, Ministry of Personal, Public Grievances & Pensions, 6[th]Floor, Nirvachan Sadan, New Delhi. 2.Site Director, RAPS 1 to 6, RAPS, Plant Site, Rawatbhata, P. O.Anushakti, Via Kota (Raj.)Anushakti, Via Kota (Raj.) 3.Executive Director (Personnel), NPCIL, V S Bhawan, Anu Shakti Nagar, Mumbai.Shakti Nagar, Mumbai. 4.Income Tax Commissioner, Ward NO. 2, Income Tax Office, Near CAD Road, Kota.Near CAD Road, Kota. 5.Deputy Secretary, Government of India, Department of Atomic Energy, CMS Marg, Mumbai-400039Atomic Energy, CMS Marg, Mumbai-400039 ----Respondents S. B. CIVIL CONTEMPT PETITION No. 469 / 2006 Parmanu Vidyut Karamchari Union (CITU), through its Secretary sonof Shri K. L. Choudhary, aged about 43 years, C-2/17, PH-II, Rawatbhata via Kota (Raj.) ----Petitioner Versus 1.Shri B S Verma, Income Tax Commissioner, Ward NO. 2, Income Tax Office, Near CAD Road, Kota.Income Tax Office, Near CAD Road, Kota. -3- 2.Shri C. P. Jain, Site Director, RAPS, Plant Site, Rawatbhata, P.O. Anushakti, Via Kota (Raj.) ----Respondents S. B. CIVIL CONTEMPT PETITION No. 99 / 2007 Mohan Lal Rathore son of Shri Mangi Lal Rathore, aged about …...bycaste Teli, resident of Kumhar Mohalla, Rawatbhata, District Kota-323305. ----Petitioner Versus 1.Shri B S Verma, Income Tax Commissioner, Ward NO. 2, Income Tax Officer, Near CAD Road, Kota.Income Tax Officer, Near CAD Road, Kota. 2.Shri Hari Singh, Income Tax Officer, Ward-1 (2), Kota. 3.Shri C. P. Jain, Site Director, RAPS, Plant Site, Rawatbhata, P.O. Anushakti, Via Kota (Raj.)O. Anushakti, Via Kota (Raj.) ----Respondents _________________________________________________ For Petitioner(s) : Mr. Suresh Kashyap and Mr. Yogesh Kumar Sharma, advs. 2.Shri C. P. Jain, Site Director, RAPS, Plant Site, Rawatbhata, P.O. Anushakti, Via Kota (Raj.) ----Respondents S. B. CIVIL CONTEMPT PETITION No. 99 / 2007 Mohan Lal Rathore son of Shri Mangi Lal Rathore, aged about …...bycaste Teli, resident of Kumhar Mohalla, Rawatbhata, District Kota-323305. ----Petitioner Versus 1.Shri B S Verma, Income Tax Commissioner, Ward NO. 2, Income Tax Officer, Near CAD Road, Kota.Income Tax Officer, Near CAD Road, Kota. 2.Shri Hari Singh, Income Tax Officer, Ward-1 (2), Kota. 3.Shri C. P. Jain, Site Director, RAPS, Plant Site, Rawatbhata, P.O. Anushakti, Via Kota (Raj.)O. Anushakti, Via Kota (Raj.) ----Respondents _________________________________________________ For Petitioner(s) : Mr. Suresh Kashyap and Mr. Yogesh Kumar Sharma, advs. For Respondent(s) : Mr. Dharmendra Jain for NPCIL, Ms. Pariniti Jain for Income Tax Deptt. Mr. Tarun Kumar Verma, advs. _________________________________________________ HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATIJudgment / Order 30/01/2017 The petitioner has preferred this writ petition makingthe following prayers:- “The contempt petition may kindly be allowed and therespondents/contemnors may be held guilty for committingcontempt of order of the learned Single Judge and thy maybe punished severely for non-compliance of judgment of theHon’ble Court as per the PROVISIONS OF THE Contempt ofCourt Act. -4- The petitioner further prays in the interest ofjustice that suitable direction may be given to therespondents/contemnors to make compliance of the interimorder dated 22/8/2006 passed by the learned Single Judge inS. B. Civil Writ Petition No.6394/2006 forthwith with allconsequential benefits including cost of this petition. Any other order or direction which the Hon’bleCourt may consider just and proper in the facts andcircumstances of the case may also kindly be passed infavour of the petitioner“ The brief facts of the case as noticed by this Court arethat the members of petitioners Union were the employees of theDepartment of Autonomic Energy, Government of India. VideMemorandum dated 4/9/1987, Government of India established anew autonomous body namely ‘Nuclear Power Corporation’ and theemployees working in the department automatically were sent ondeputation and these employees remained on deputation till31/121997. From 1/1/1998 technical resignation was given bythese employees and their absorption was completed in NPCIL. Until1/1/1998 the petitioners remained as deputationists. Clause ‘C’ ofClause 3.6 of the Memorandum entitled the employees to receivegratuity or pension as admissible to the Staff or their families underthe Rules applicable. These employees remained in pro rata category and theservices rendered upto date of absorption the gratuity was payableas per the provisions of C.C.S. (Pension) Rules, 1972. The counselfor the petitioner has averred that the respondents have withheldthe payment of gratuity without consent of the concernedemployees for a period of 7 years, even without any provision inlaw. The Clause 3.1.4 of the offer of the absorption in NPCIL asreproduced by the petitioners is as under:- -5- “The amount of retirement gratuity admissible to themshall remain with the government for a period of sevenyears and earn interest (taxable) at the rate prescribedfor General Provident Fund deposits from time to time forthe above period. The same shall be paid to the employeeon the expiry of a period of 7 years from time the date ofpermanent absorption. In the case of those who opt forsettlement of pensionary benefits under para 3.1.1.(b)above the period of seven years from shall commencefrom the date. The amount, however, can be paid earlierin the event of death/ retirement/ resignation/ dischargefrom service” -5- “The amount of retirement gratuity admissible to themshall remain with the government for a period of sevenyears and earn interest (taxable) at the rate prescribedfor General Provident Fund deposits from time to time forthe above period. The same shall be paid to the employeeon the expiry of a period of 7 years from time the date ofpermanent absorption. In the case of those who opt forsettlement of pensionary benefits under para 3.1.1.(b)above the period of seven years from shall commencefrom the date. The amount, however, can be paid earlierin the event of death/ retirement/ resignation/ dischargefrom service” Thus, the Clause 3.1.4 clearly mentioned the amount ofgratuity was to remain with the Government for the period of 7years and earned interest shall accrue at the rate prescribed forGeneral Provident Fund deposits from time to time for the period.The petitioners Union made a representation to the NPCIL on21/12/02004 stating therein that as per Section 10 15 (IV) (I) ofthe Income Tax Act, the amount of gratuity is not taxable, whereasthe respondents have deducted @ 10% tax against the said amountof employees. As per Section 194-A (VI) of the Income Tax Actcertain payments of interest which are subject to representation oftaxpayers and as per the petitioners’ tax was not payable on thedeposit scheme for retired Government employees. The petitioners-employees on being aggrieved of suchdeduction have challenged the deduction and also decision of therespondents to withhold the amount of gratuity for 7 years. The respondents have filed a detailed reply and statedthat they are not deducting any income tax on the delayed payment of gratuity of the members of the Union. Section 192 ofIncome Tax Act is under chapter 17 and under Subject ‘B’. It dealswith the collection and recovery of the tax. Section 192 providesthat any person who is responsible for paying income chargeableunder salaries shall at the time of payment deducted pay incometax on the amount payable at the average of the tax computed onthe basis of rates raised in orders. It was stated in the reply that the petitioners Union hadagreed at the time of option of the absorption with the NuclearPower Corporation which is a Government of India enterprises tothe condition of interest income earned being made taxable.However, even if, there was no agreement then also the deductionof tax at source was mandatory for employer as no agreement wasenforceable against the statute. The respondents also stated thatthe amount of retirement gratuity was admissible but theyremained with the Government for a period of 7 years and theearned interest (taxable) at the rate prescribed for GeneralProvident Fund deposits from time to time for the above period wason account of approval of the same by the petitioners Union. It wasalso submitted by the respondents that the agreement clearlypostulated retirement gratuity to remain with the Government for aperiod of 7 years and lieu of said representation Government wasunder obligation to pay this fund to the members petitioners Unionat the rate prescribed for the General Provident Fund from time totime. The accumulated fund which was to be with the Governmentuntil 7 years was to be paid by to such employees and the samewas earned interest at the rate prescribed for the General ProvidentFund. Learned counsel for the petitioner Mr. Suresh Kashyappointed out the judgment in the case of S. S. Miranda Ltd. VsShyam Bahadur Singh passed by the Calcutta High Court [reportedin Factories Journal Reports Vol. 67 Page 162], the relevant portionof which is as follows:- Learned counsel for the petitioner Mr. Suresh Kashyappointed out the judgment in the case of S. S. Miranda Ltd. VsShyam Bahadur Singh passed by the Calcutta High Court [reportedin Factories Journal Reports Vol. 67 Page 162], the relevant portionof which is as follows:- “The case of the respondent is that the respondent wasentitled to get payment under the decree and there was noscope for deduction of income-tax from the amount that wasdirected to be paid. Reliance was placed for this propositionon the case of All India Reporter Limited v. Ramchandra D.Datar [1961] 41 ITR 446 (SC), wherein it was held that wherean employee obtains a decree for arrears of salary,compensation for wrongful termination of service and salarydue for the period of notice and also interest and costs, therewas no scope for applying the provision for deduction ofincome-tax at source. The amount was payable as "judgment-debt" and not as "salary" and the judgment-debtor could notclaim to deduct income-tax payable as salary. In view of thiswell settled principle, the respondent is entitled to succeed inthis appeal and the appeal must fail.” Learned counsel for the petitioners also argued that therespondents had in fact returned the amount in some of the casesby referring to the income of the particular assessment yearwhereby the interest payable and refund due to the employees wastermed in accordance Section 143 (1) of the Income Tax Act, 1961. It is also argued by the learned counsel for thepetitioners that employees of the Union were not a party inagreement between two departments and withholding of thegratuity for 7 years was per se illegal and the if the gratuity wouldhave been paid at the time of absorption then no question wouldhave arose to deduct any tax at the interest so accrued. Counsel for the petitioners further drew attention of theCourt to the representation made by the Union taking up of the -8- cause of said deposits to be repaid with interest and the income taxrecovery of T.D.S. being imposed. It was stated in therepresentation that Section 10 sub Section 15 (IV) (I) of theIncome Tax Act clearly postulated that there was no income taxpayable on the said amount. However, the petitioners in their earlierrepresentations have not protested the withholding of the gratuityfor a period of 7 years by the respondents-department. After hearing the counsel for both the parties andperusing the record of the case as well as precedent law cited, thisCourt is of the opinion that the petitioners-employees had right ofpayment of the retirement gratuity admissible to them to bewithheld by the Government for 7 years and in lieu of that theywere entitled to have interest at the rate prescribed for GeneralProvident Fund deposits from time to time. It is note worthy thatthe Clause 3.1.4 as reproduced in this Judgment as well as in para6 of the writ petition clearly stipulate that the interest earned uponthe retirement gratuity for a period of 7 years shall be taxable and,therefore, it would not be open for the petitioners to seek any kindof exemption from the tax interest so payable. It is also important to note that the tax was not beingcharged upon the gratuity and in fact the tax was being chargedupon the interest income which were earned by the members of theemployees Union and, therefore, the deduction at source wassupported by law. The amount of gratuity remained for 7 years withthe Government as decided by the agreement on 24/4/1997 and,therefore, it was not open for the petitioners to protest against thedecision of the Government to retain the gratuity for a period of 7years. It is also important to note that the tax was not beingcharged upon the gratuity and in fact the tax was being chargedupon the interest income which were earned by the members of theemployees Union and, therefore, the deduction at source wassupported by law. The amount of gratuity remained for 7 years withthe Government as decided by the agreement on 24/4/1997 and,therefore, it was not open for the petitioners to protest against thedecision of the Government to retain the gratuity for a period of 7years. The respondents have also made a categorical reply inpara 3 of their reply stating that the petitioners Union themselvesagreed at the time of option of absorption with the Nuclear PowerCorporation to allow the Government to retain the retirementgratuity for a period of 7 years and then the same become payablealongwith the earned interest (taxable) at that time. Thus, it wasnot open to the petitioners to challenge the approval of withholdingthe retirement gratuity for a period of 7 years. Moreover,withholding of such gratuity for a period of 7 years had to accrue tothe employees with the earned interest which was taxable at therate prescribed as per the agreement itself. Thus, it is clear casewhere the petitioners Union employees and all the employees weregiven a common benefit of retirement gratuity after 7 yearsalongwith earned interest. No tax was chargeable on the gratuity inaccordance with law and only tax was charged upon the interestthat accrued upon the retirement gratuity and which is chargeableunder the law as well as supported by the agreement’s Clause 3.1.4of the offer of absorption in NPCIL. The precedent law would notapply in this case because it is dealing with the arrears of salaryand pension for wrong termination where the employee did nothave the option or was party to such termination. The Clause 3.1.4 of the absorption in the NPCIL hasstated to be approved by the Union of the employees in the replyand was sufficient to make the interest taxable and any order ofrefund made under Section 47 of the Income Tax Act would notcome to help of the petitioners because it was always theprerogative of the respondent department to see as to whether theemployees had disclosed the income from the interest earned. Andafter interest from the income was disclosed the same was definitely liable to be taxed. In light of the aforementioned discussions, this casedoes not call for any indulgence. The writ petitions are accordinglydismissed. The contempt petitions as well as both the applicationsin these matters are also dismissed in light of the judgment sopassed. petitions. A copy of this judgment be placed in each of the writ (DR. PUSHPENDRA SINGH BHATI)J. K KumawatJr. P. A.