No income tax on VRS for staff of sick PSU: HC
Chennai:
TIMES NEWS NETWORK
|
In a significant ruling, the
Madras high court said the voluntary retirement scheme (VRS) package,
equal to salary for 72 months, paid to willing employees of Hindustan
Photo Film (HPF) Manufacturing Company Limited in Ooty was in the nature
of compensation and no income tax should be deducted. On their part,
employees accepting the package shall vacate and hand over possession of
the quarters within a month of the date on which they receive the
monetary benefits, the court said.
Justice T S Sivagnanam,
concurring with the submissions of senior counsel R Vaigai, said: “The
benefit, which will accrue to the employees, is in the nature of
compensation, which is pursuant to a decision taken by the government of
India specifically for the employees of HPF. Therefore, the amount
would be exempted from income tax in terms of the first proviso under
Section 10
(10B) of the IT Act. Therefore, provisions of Section 10 (10B) of the
Income Tax Act, 1961 are attracted and accordingly , the same shall not
fall within the definition of income, while computing the total income
of concerned employee and income tax cannot be deducted from the
severance package paid to the employees of HPF.“
Quick to realise the ruling could lead to other public sector undertakings preparing similar severance packages for their employees, counsel for the Centre said the government of India would appeal against it in the Supreme Court. Once a public sector giant with a monopoly in X-ray films market, HPF became a white elephant since 1987 when salary stagnated and staff had either no or little work. A VRS package was readied by the Cabinet Committee on Economic Affairs which approved a proposal for providing non-plan budgetary support of `181.54 crore for voluntary retirement at the 2007 notional pay scale.
The HPF Workers' Welfare Centre termed VRS unfair and illegal. It sought payment of 72 months' salary on 2007 payscale to each employee, non-deduction of income tax on severance package, special performance allowance, adjustable advance paid to employees and permission for employees to occupy staff quarters till May 1, 2016 at the same rate of rent.
Contentious issues boiled down to 72 months' salary as severance package instead of 60 months, exemption from income tax and no eviction from the quarters.
Quick to realise the ruling could lead to other public sector undertakings preparing similar severance packages for their employees, counsel for the Centre said the government of India would appeal against it in the Supreme Court. Once a public sector giant with a monopoly in X-ray films market, HPF became a white elephant since 1987 when salary stagnated and staff had either no or little work. A VRS package was readied by the Cabinet Committee on Economic Affairs which approved a proposal for providing non-plan budgetary support of `181.54 crore for voluntary retirement at the 2007 notional pay scale.
The HPF Workers' Welfare Centre termed VRS unfair and illegal. It sought payment of 72 months' salary on 2007 payscale to each employee, non-deduction of income tax on severance package, special performance allowance, adjustable advance paid to employees and permission for employees to occupy staff quarters till May 1, 2016 at the same rate of rent.
Contentious issues boiled down to 72 months' salary as severance package instead of 60 months, exemption from income tax and no eviction from the quarters.
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