An employer challenged a Controlling Authority's order directing it to refund income tax deducted at source on gratuity paid under private trust rules. The High Court held the authority lacked power over income-tax refunds and wrongly condoned a six-year delay, quashing that portion of the order.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
NC: 2024:KHC:51989 WP No. 7496 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF DECEMBER, 2024
BEFORE
THE HON'BLE MS. JUSTICE JYOTI MULIMANI WRIT PETITION NO. 7496 OF 2024 (L-PG)
BETWEEN:
M/S. ASTRAZENECA PHARMA INDIA LIMITED, BLOCK N1, 12TH FLOOR, MANYATA EMBASSY BUSINESS PARK, RACHENAHALLI OUTER RING ROAD, BANGALORE-560 045. THE COMPANY IS INCORPORATED UNDER COMPANIES ACT 1956, DEALING WITH PHARMACEUTICALS. REPRESENTED BY ITS COUNTRY HR DIRECTOR SMT.AMARPREET KAUR AHUJA.
…PETITIONER
(BY SRI. C.K.SUBRAHMANYA., ADVOCATE FOR SRI. B.C.PRABHAKAR., ADVOCATE)
AND:
Digitally signed by PREMCHANDRA M R Location: High Court of Karnataka
…RESPONDENTS (R1-SERVED AND UNREPRESENTED; BY SRI. S.H.RAGHAVENDRA., AGA FOR R2)
NC: 2024:KHC:51989 WP No. 7496 of 2024
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, SEEKING CERTAIN RELIEFS.
THIS WRIT PETITION IS LISTED FOR DICTATION OF ORDERS, THIS DAY, AN ORDER IS MADE AS UNDER:
ORAL ORDER
Sri.Subramanya., counsel on behalf of Sri.B.C.Prabhakar., for the petitioner and Sri.Raghavendra., AGA for respondent No.2 have appeared in person.
An emergent notice to the first respondent was ordered on 26.03.2024. A perusal of the office note depicts that respondent No.1 is served and unrepresented. He has neither engaged the services of an advocate nor conducted the case as a party in person.
2. The short facts are these:
Sri.Ashwath Rao.M.N - the first respondent joined the services of the petitioner's Company on 19.12.1983. On 06.04.2012, he left the Company's services by opting for voluntary retirement under the Scheme introduced by the Company. As per the Gratuity Fund Trust Rules of the Company, he was entitled to Gratuity to the tune of
NC: 2024:KHC:51989 WP No. 7496 of 2024
Rs.8,59,740/-, whereas under the Payment of Gratuity Act, 1972, he was entitled to Gratuity of Rs.4,53,842/-.
The workman, Sri.Ashwath Rao.M.N opted to receive the gratuity as per the Gratuity Fund Trust Rules. The petitioner Company deducted the income tax of Rs.1,25,422/- and remitted the same to the Income Tax Department. The workman received the balance of Rs.7,34,318/- without any demur.
Thus, after a lapse of almost six years, the first respondent filed a claim application claiming a sum of Rs.4,40,898/-. He also filed an application to condone the delay. The Controlling Authority condoned the delay. The Controlling Authority vide order dated 05.12.2023 allowed the application in part and directed the petitioner to pay a sum of Rs.1,25,422/- deducted towards the Income Tax amount to the first respondent. The portion of the order directing the petitioner to refund the income tax amount is called into question in this Writ Petition on several grounds as set out in the Memorandum of Writ Petition.
NC: 2024:KHC:51989 WP No. 7496 of 2024
that the order of the Controlling Authority is arbitrary, illegal and without jurisdiction.
Next, he submits that the Labor Officer is required to exercise authority only under the Payment of Gratuity Act of 1972 and not under the Income Tax Act of 1961. Hence, the order/direction to refund the Tax amount is not only without jurisdiction but also perverse.
A further submission is made that the authority failed to note that Income Tax deducted from the source was remitted to the Income Tax Department in 2012. Even assuming that the first respondent is entitled to a refund, he must approach the Income Tax Authority to claim a refund by filing an Income Tax Return as mandated under the Income Tax Act.
Counsel vehemently contended that the Authority had no jurisdiction to entertain the claim application filed by the first respondent when there was an inordinate delay of six years.
Lastly, he submits that viewed from any angle, the order of the Controlling Authority is untenable. Counsel, therefore,
submits that the order of the Controlling Authority is liable to be set aside and the Writ Petition may be allowed.
Next, he justified the order of the Controlling Authority. He drew the attention of the Court to the relevant provisions of the Payment of Gratuity Act, 1972 to contend that the Controlling Authority has the power to determine the amount of gratuity and pass an order to refund the income tax.
A further submission is made that there is no provision concerning the payment of income tax on the gratuity paid beyond what is mentioned in Section 4 (3) of the Payment of Gratuity Act 1972. He vehemently contended that as per Section 10(iii) of the Income Tax Act, 1961, the Management has no power to deduct Income Tax. To substantiate the contention, AGA relied on the order in W.P.No.5759/2006 in the case of NORTH WEST KARNATAKA TRANSPORT
CORPORATION, HUBBALLI Vs. THE DEPUTY LABOR COMMISSIONER AND THE APPELLATE AUTHORITY UNDER THE PAYMENT OF GRATUITY ACT AND OTHERS .
AGA vehemently contended that the Ceiling limit was Rs.10,00,000/- and hence, the petitioner has erred in deducting the income tax amount.
Lastly, he submits that the Writ Petition is devoid of merits and the same may be dismissed.
with care.
NC: 2024:KHC:51989 WP No. 7496 of 2024
As we all know, gratuity is a monetary benefit given by the employer. Gratuity is a single-time payment made to the employee. It is a token of appreciation for the employees' time and effort spent with the management. Gratuity is regarded as an appreciation for hard work. Gratuity is a payment made to an employee for services given to the company, hence, it is only the statutory gratuity that is exempt from income tax.
Reverting to the facts of the case, the first respondent left the services of the company on the Sixth day of April 2012 by opting for voluntary retirement under the scheme that was introduced by the company. There was a settlement and the first respondent received the gratuity under the Private Trust Rules i.e., Employees Gratuity Fund Trust Rules. Accordingly, the first respondent was entitled to a sum of Rs.8,59,740/-. Since the gratuity was paid under the Private Trust Rules, the management deducted the income tax of Rs.1,25,422/- and
immediately after the deduction of income tax at source, Form16 was furnished to the first respondent. The income tax deducted at source was remitted to the Income Tax Department.
It is relevant to notice that the first respondent had no grievance either about the payment of the gratuity or the deduction of the income tax. Strangely, after a lapse of almost six years, he filed an application before the Controlling Authority contending that he is entitled to receive the balance of Gratuity amount of Rs.4,40,898/- with 18% interest per annum. An application to condone the delay was filed. Despite the objections, the Controlling Authority condoned the delay and passed an order directing the petitioner to refund the amount deducted towards Income Tax. This is untenable. The reason is simple and apparent. The order of the Controlling Authority is furnished along with the Writ Petition and marked as Annexure-C. A careful perusal of the same would reflect that the Controlling Authority assumed the jurisdiction as if it were an authority under the Income Tax Act and concluded that the petitioner was not justified in deducting the income tax. In my view, the authority has unnecessarily tried to discuss much on
NC: 2024:KHC:51989 WP No. 7496 of 2024
the tax ceiling limit and erroneously went ahead with the matter.
The Management deducted the income tax over and above the amount to which the first respondent was entitled to the gratuity. The Controlling Authority ordered to refund of the income tax. The Controlling Authority is not the proper Forum to pass an order to refund the income tax. If the first respondent had any grievance about the deduction of the income tax, he must approach the appropriate authority to claim a refund by filing an Income Tax Return as mandated under the Income Tax Act. Moreover, under the provisions of the Payment of Gratuity Act, 1972, the Controlling Authority is empowered to determine the amount of gratuity and not to pass an order for the refund of the income tax. The Labor Officer has overlooked this aspect of the matter and has acted more than his authority. I may venture to say that the Authority has failed to have regard to the relevant considerations and disregarded the relevant matters. Hence, a Certiorari under Article 226 is issued to correct the gross error.
paid the gratuity to the first respondent in 2012. However, he applied before the Controlling Authority claiming a difference in gratuity in 2018. The authority condoned the delay. The authority is not justified in condoning the delay. As per the Rules, the application must be made within ninety days. However, in the present case, the first respondent applied after a lapse of six years. In my view, the application ought to have been rejected on the grounds of delay and laches.
Moreover, the statutory provision of filing an appeal before the Appellate Authority to question the issue about the power of the Controlling Authority is not an alternate or equally efficacious remedy as such filing an appeal would be an empty formality or a futile exercise or attempt. I may say that the statutory remedy is ill-suited to meet the demands of an extraordinary situation. Therefore, I deem it proper to exercise discretion to interfere in a petition under Article 226.
For the reasons stated above, the portion of the order directing the petitioner to refund the amount deducted towards income tax is liable to be set-aside and so, it is set-aside.
12. Resultantly, the Writ Petition is allowed .
Sd/(JYOTI MULIMANI) JUDGE
TKN,MRP List No.: 1 Sl No.: 7
3 issues framed by the court
Whether the Controlling Authority under the Payment of Gratuity Act has power to decide refund of income tax deducted from gratuity.
Whether the Controlling Authority was justified in entertaining a claim application filed beyond the limitation period.
Whether writ jurisdiction under Article 226 could be exercised despite an alternate appellate remedy.
Colour shows how this judgement treated each authority
5 provisions across 3 enactments
M/s. AstraZeneca Pharma India Limited
Ashwath Rao M.N.
Labour Officer and Controlling Authority under Payment of Gratuity Act 1972, Sub-Division-3, Bengaluru
Jyoti Mulimani
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
