The Commissioner Of Income Tax (Tds) v. Hindustan Photo Film Workers' Welfare Centre(Citu) (Regn

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 01.07.2021 THE HON'BLE MR.JUSTICE M.M.SUNDRESHandTHE HON'BLE MS.JUSTICE R.N.MANJULA W.A.Nos.741,746,743,742,744 and 745 of 2018 and C.M.P.Nos.7141,7140,7139,7143 and 7142 of 2018 W.A.No.741 of 2018 The Commissioner of Income Tax (TDS),No.121, Uthamar Gandhi Salai,Chennai - 600 034. ... Appellant/3[rd] Respondent in all WAs Vs 1.Hindustan Photo Film Workers' Welfare Centre(CITU) (Regn.No.31/NLG) Rep. by its General Secretary, Indu Nagar, Ootacamand, The Nilgris - 643 005, Tamil Nadu ...Ist Respondent/ Petitioner in W.A 741 of 2018 2.Indu Film Officers Association(IFOA) (REGN.No.65/NLG) Rep by its General Secretary, C/o Hundustan Photo Films, Indu Nagar, Ootacamund, The Nilgiris-643 005. ...Ist Respondent/ Petitioner in W.A NO.742 of 2018 3.Film Factory Workers Union (INTUC) (Regn.No.49/NLG) rep by its General Secretary, C/o Hindustan Photo Films, Indu Nagar, Ootacamund, The Nilgiris-643 005. ...Ist Respondent/ Petitioner in W.A No.743 of 2018 4.Anna Indu Employees Union (AIEU), (Regn. No.99/NLG) rep by its Secretary, C/o Hindustan Photo Films Indu Nagar, Ootakamund, The Nilgiris-643 005. ...Ist Respondent/Petitioner in W.A.No.744 of 20185.HPF Staff Union (BMS), (Regn.No.165/NLG) rep by its General Secretary, C/o.Hindustan Photo Films, Indu Nagar, Ootacamund, The Nilgiris-643 005. ...Ist Respondent/ Petitioner in W.A No.745 of 20186.Indu Employees Progressive Union (LPF) (Regn.No.36/NLG), rep by its General Secretary, C/o. Hindustan Photo Films, Indu Nagar, Ootacamund, The Nilgiris-643 005. ...Ist Respondent/ Petitioner in W.A No.746 of 20187.The Government of India Rep. by its Secretary, Department of Heavy Industry Ministry of Heavy Industries & Public Enterprises, Udyog Bhavan, New Delhi - 110 001.8.Hindustan Photo Film Manufacturing Co., Ltd., Indu Nagar, Ottacammand, The Nilgris - 643 005. ... Respondents/Respondents 1 & 2in all Writ Appeals Prayer in W.A.No.741 to 746 of 2018:Appeal filed underClause 15 of Letters Patent against the order dated 17.03.2017made in W.P.Nos.18556 of 2015, 18608/2015, 18609/15, 18610/15,18788/15 and W.P.No.18789 of 2015 respectively. Common Prayer in W.P.No.18556, 18608, 18609, 18610, 18788 and18789 of 2015: Writ Petition filed under Article 226 of the Constitution ofIndia to issue a Writ of Declaration to declare that the letterbearing Ref.No. 19(2)/2013-PE.III dated 20.3.2014 issued by the1st respondent read with Circular No. P1/14/59/VRS dated21.3.2014 issued by the 2nd respondent as illegal andunconstitutional in so far as the quantum of payment and https://hcservices.ecourts.gov.in/hcservices/ consequently direct the Respondents to pay compensation to allthe employees of the 2nd respondent who have retired / retireunder the Voluntary Retirement Scheme announced by the letterdated 20.3.2014 issued by the 1st respondent read with thecircular dated 21.3.2014 issued by the 2nd respondent on thefollowing basis: a. 72 months salary on the 2007 pay scales toeach employee b. Arrears of pay on 2007 pay scales to eachemployee c. No deduction towards income tax on the severancepackage payable under the VRS scheme; d. No deduction of theamount of recoverable monthly advance, Special performanceallowance and Adjustable Advance paid to the employees so farand e) permitting the employees to occupy the staff quarters ofthe second respondent at Udhagamandalam till 01.05.2016 at thesame rate of rent charged until the voluntary Retirement Scheme. Prayer in W.P.No.18556 of 2015: (Delivered by M.M.SUNDRESH, J.) All these appeals have been preferred by the appellantslaying a challenge to the orders passed in a batch of writpetitions filed in W.P.No.18566 of 2015 etc., dated 17.03.2017. Prayer in W.P.No.18556 of 2015: (Delivered by M.M.SUNDRESH, J.) All these appeals have been preferred by the appellantslaying a challenge to the orders passed in a batch of writpetitions filed in W.P.No.18566 of 2015 etc., dated 17.03.2017. 2. We do not wish to travel much on the facts involved.Suffice it to state that the issue involved in these appeals iswith respect to the deduction of TDS on the amount paid andpayable to the workmen being the members of the firstrespondent. The workmen were made entitled for certain paymentconsequent upon the closure of the Industry. Winding upproceedings were initiated before this Court and an order wasaccordingly passed by the learned Single Judge in C.P.No.114 of2003, wherein, it has been held that the payment due to theworkmen is a special package though styled as VoluntaryRetirement Scheme. Paragraph 14 of the order of the learnedSingle Judge in C.P.No.114 of 2003 dated 24.01.2017 isappositely recorded hereunder:-"14. The only apprehension of the workmen appearsto be that if the assets of the company inliquidation are taken over by the learned OfficialLiquidator, then the workmen fear that they mayhave to stand before the learned Official Liquidator in the queue along with other unsecuredcreditors to recover the dues and that they shouldnot be put to such an ordeal, more particularlywhen the Central Government has sanctioned aspecial package to take care of the workmen optingunder the VRS Scheme." 3. Incidentally, the very same learned Single Judge took upthe issue, namely, the aforesaid due payment is to be construedas a special package coming under the second proviso to Section10(10B) of the Income Tax Act as against the case sought to beprojected by the appellant that it would come under Section 10(10C) being the Voluntary Retirement Scheme. 4. Learned Single Judge upon hearing the counsel was pleasedto hold that it being a special package, second proviso wouldalone be made applicable. 5. Challenge has been made by the Central Government againstthe order of the learned Single Judge on the other issue.Incidentally, we may note that the learned counsel appearing forthe appellant was also heard. In W.P.No.616 of 2017 dated29.06.2017, the issue has been dealt with by the DivisionBench, which is extracted hereunder:- "12. In the meanwhile, there is also claim of theIncome Tax Department to deduct TDS out of theamount which is to be paid to the workmen by way ofVRS Scheme. It is brought to the notice of theCompany Court that deduction of TDS it appears thatit may be run up to 4 crores. Learned SeniorStanding Counsel for the Income Tax Department,then representing before the Company Court informedthat if a representation is given by one of theworkmen through their Union the same would beplaced before the Central Board of Direct Taxes inthis regard for necessary consideration. Sincealready the learned Standing Counsel for the IncomeTax Department has offered a scheme to place thematter before the Central Board of Direct Taxes asto the deduction of the amount at source by way ofTDS to the tune of 4 Crores once again delayedelsewhere if the association or any individualfiles an application to seek such concession. Sofar as the deduction of TDS is concerned alreadygiven opportunity to the Standing Counsel appearingon behalf of the Income Tax Department. It isobserved that TDS would not be applicable to thecase on hand. 13.Now, it appears as practice in respect ofearlier settlement amount, the income taxdepartment also exercise its rights seeking for TDSamount. Such being the case, there could not be anydispute once again by filing appeal or otherwise tothe Income Tax Department if the amount cannot besubject to tax at source or TDS or collect incometax from the workmen concerned. However, any suchobservation to be made by this Court as alreadyobserved by this Court it should not be in the wayof the right available to the Department withregard to challenge of the said finding by thelearned Single Judge. There is a direction inrespect of other workers to deposit the TDS amountin a ESCROW Account. The same will apply to theworkers herein also." 6. The Special Leave Petition filed by the Governmentchallenging the aforesaid order has also ended in dismissal inS.L.P.(c)Nos.5595-5601/2018 dated 19.02.2018. 7. Though the learned counsel appearing for the appellantseek to contend that the case on hand would come under Section10(10C) of the Income Tax Act, in which case, the amountquantified is only the Voluntary Retirement payment, we do notsubscribe to the said view expressed. Incidentally, the learnedcounsel appearing for the appellant submitted that if it is acase under first proviso to Section 10(10B) of the Income TaxAct, there is a cap with respect to the amount quantified -Rs.50,000/-. This will only militate against the members of thefirst respondent. 8. The said contention also, in our considered view, cannotbe countenanced. As rightly submitted by the learned SeniorCounsel appearing for the first respondent, it is a case of thefirst respondent/writ petitioner that the case would fall underthe second proviso. 9. The learned Single Judge has considered this issue inextenso in paragraphs 31 and 32, which are extracted hereunder:-"31. As mentioned above, the Government of Indiahad recommended a scheme to give relief to theemployees of HPF. This proposal was approved by theCabinet Committee on Economic Affairs and suchapproval was a non-plan budgetary support. TheGovernment of India did not authorise the HPF tobring out a VRS package, but what was approved wasa non-plan budgetary support, which is in thenature of a grant given by the Central Governmentto the second respondent for a specific purpose and a specific reason. The purpose is to rehabilitatethe employees of HPF and the reason being that theemployees have been receiving the pay scales as of1987, the increase in the cost of living has madeit very difficult for them to survive and meettheir financial obligations and the Governmentthought fit to offer this package to enable theemployees to come out of the financial crises. Ifsuch was the sanction made by the CentralGovernment, it undoubtedly would qualify theparameters laid down under sub-section(10B) ofSection 10 of the Income Tax Act. This is sobecause the monetary benefit which will accrue tothe employees is in the nature of a compensation,which is pursuant to a decision taken by theGovernment of India specifically for the employeesof HPF. Therefore, the amount would be exemptedfrom income tax in terms of the first proviso underSection 10 (10B) of the IT Act. In terms of clause(2) of first proviso, the ceiling limit isRs.5,00,000/-. The second proviso states that thefirst proviso shall not apply in respect of anycompensation received by a workmen in accordancewith any scheme, which the Government may, havingregard to the need for extending the specialprotection to the workmen in the undertaking towhich such scheme applies and other relevantcircumstances, approve in its behalf. Thecompensation which is received by the workmen wouldfall within the definition of compensation found inexplanation to Section 10(10B). 32. In such circumstances, this Court has nohesitation to hold that the package having beenreceived by the workmen as compensation pursuant tothe decision taken by the Central Government tooffer special protection to the employees of HPF,the same stands exempted from deduction to incometax." 10. We do not find any perversity in such a finding renderedby the learned Single Judge. After all, as indicated by usearlier, it is the very same learned Single Judge, who passedthe order in C.P.No.114 of 2003. Therefore, the interpretationgiven has to be accepted with respect to the nomenclature of theScheme. Though it is referred as Voluntary Retirement Scheme,one has to see the object and intent behind it. When once afactual finding is given that it is a special package, adifferent view is not possible. We may note that the case onhand involves a chequered history with respect to the running of Industry qua rights of the workmen. That is the reason why, anorder has been passed by the Company Court on 24.01.2017 afterfinding that the company requires to be wound up. Therefore,this is not a case of voluntary retirement by the workmen, but,on the other hand, brought forth by contingency. Therefore, thereason of the learned Single Judge bringing the case under thesecond proviso is perfectly in order. 11. In such view of the matter, we have no hesitation inconfirming the order of the learned Single Judge. In thisconnection, we would like to make a special note on the decisionrendered by the Division Bench as confirmed by the Hon'ble ApexCourt. 12. Thus, looking from any perspective, we do not find anyreason to interfere with the well merited orders passed by thelearned Single Judge. 13. Accordingly, the writ appeals stand dismissed. No costs.Consequently, connected miscellaneous petitions are closed. 14. At this juncture, learned senior counsel appearing forthe first respondent brought to our notice that during thependency of the proceedings before the learned single Judge, anorder was passed directing the appellant to deposit certainamount in the name of Registrar General, High Court, Madras.This amount certainly will have to go to the members of thefirst respondent. In such view of the matter, Registry isdirected to release the said amount so as to enable the membersof the first respondent to get the benefits as the aforesaidarrangement is only interim in nature and we are disposing ofthe main appeals themselves, confirming the orders of thelearned single Judge. Needful will have to be done within aperiod of six weeks from the date of receipt of a copy of thisjudgment. Sd/- Assistant Registrar(CS IX) //True Copy// Sub Assistant Registrar To: 1.The General Secretary, Hindustan Photo Film Workers' Welfare Centre(CITU) (Regn.No.31/NLG) Indu Nagar, Ootacamand, The Nilgris - 643 005, Tamil Nadu.2.The General Secretary, Indu Film Officers Association(IFOA) (REGN.No.65/NLG) C/o Hundustan Photo Films, Indu Nagar, Ootacamund, The Nilgiris-643 005. 3.The General Secretary, Film Factory Workers Union (INTUC) (Regn.No.49/NLG) C/o Hindustan Photo Films, Indu Nagar, Ootacamund, The Nilgiris-643 005. 4.The Secretary, Anna Indu Employees Union (AIEU), (Regn. No.99/NLG) C/o Hindustan Photo Films Indu Nagar, Ootakamund, The Nilgiris-643 005. 5.The General Secretary, HPF Staff Union (BMS), (Rgen.No.165/NLG) C/o.Hindustan Photo Films, Indu Nagar, Ootacamund, The Nilgiris-643 005. 6.The General Secretary, Indu Employees Progressive Union (LPF) (Regn.No.36/NLG), C/o. Hindustan Photo Films, Indu Nagar, Ootacamund, The Nilgiris-643 005. 7.The Secretary, Government of India Department of Heavy Industry Ministry of Heavy Industries & Public Enterprises, Udyog Bhavan, New Delhi - 110 001. 8.Hindustan Photo Film Manufacturing Co., Ltd., Indu Nagar, Ottacammand, The Nilgris - 643 005. 7.The Secretary, Government of India Department of Heavy Industry Ministry of Heavy Industries & Public Enterprises, Udyog Bhavan, New Delhi - 110 001. 8.Hindustan Photo Film Manufacturing Co., Ltd., Indu Nagar, Ottacammand, The Nilgris - 643 005. +6ccs to M/s.Karthik Ranganathan, Advoate Sr.30713 to 30718+1cc to M/s.S.Sakthivel, Advocate Sr.30597 W.A.Nos.741,746,743,742,744 and 745 of 2018 ppa[co]srg 27/07/2021