Court asks the Centre to refund tax deducted from package of HPF employees 

 No I-T on workers’ severance package: HC

Making it clear that income tax cannot be deducted on the amount received under special retirement scheme announced by the government to its employees, the Madras High Court has directed the Centre to refund the tax deducted from the workers of Hindustan Photo Film (HPF) Manufacturing Company Limited, Ooty, who received 72 months pay as compensation for early retirement.

Justice T.S. Sivagnanam passed the directions on the plea moved by the Hindustan Photo Film Workers Welfare Centre, affiliated to CITU, challenging the voluntary retirement scheme announced by the company as unfair and illegal and for consequential benefits and exemption from the income tax for the compensation received by them.

Allowing the petition partially, the judge said: “The monetary benefit, which will accrue to the employees, is in the nature of compensation, which is pursuant to a decision taken by the government specifically for the employees of HPF. Therefore, the amount would be exempted from income tax under the provisions of the Income Tax Act.

The compensation amount shall not fall within the definition of income, while computing the total income of employee concerned and income tax cannot be deducted from the severance package paid to the employees of HPF.”

The VRS was introduced by the Cabinet Committee on Economic Affairs (CCEA), which approved a proposal for non-plan budgetary support of Rs. 181.54 crore for voluntary retirement at the 2007 notional pay scale.

Union’s plea
The HPT Workers’ Association challenged the scheme as unfair and illegal and sought payment of 72 months salary on 2007 pay scale to each employee, non-deduction of income tax on the severance package, special performance allowance, adjustable advance paid to employees and permission for the employees to occupy the staff quarters till May 1, 2016 at the same rent.

Mr. Justice Sivagnanam, while rejecting the claim of workers to declare the VRS notification and circular as illegal and unconstitutional, said there was no compulsion to accept the package. Pointing out that no one who refused the package was before the court, he said: “All these cases challenge the notification but the net effect is all employees want to leave the organisation, but they seek better terms.”