Allowed

M/ S Astrazeneca Pharma India Ltd. v. Mr Charles H

Karnataka HC17 Dec 2024WP/7670/2024

Case brief

AI extract

What is this about?

This writ petition challenged a Controlling Authority's order directing an employer to refund income tax deducted over the gratuity ceiling. The High Court held the Authority lacked jurisdiction to decide tax refunds, the delay was uncondonable, but quashed the specific tax refund direction due to lack of jurisdiction while allowing the writ.

What did the court decide?

The portion of the order dated 05.12.2023 directing the petitioner to refund the income tax amount is set aside and quashed.

M/ S Astrazeneca Pharma India Ltd. Vs Mr… — Pension and Retirement Benefits | Karnataka HC (2024)

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NC: 2024:KHC:51990 WP No. 7670 of 2024

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 17^TH DAY OF DECEMBER, 2024

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BEFORE

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THE HON'BLE MS. JUSTICE JYOTI MULIMANI

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WRIT PETITION NO. 7670 OF 2024 (L-PG)

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BETWEEN:

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M/S. ASTRAZENECA PHARMA INDIA LIMITED, BLOCK N1, 12^TH 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.

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…PETITIONER

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(BY SRI. C.K.SUBRAHMANYA., ADVOCATE FOR SRI. B.C.PRABHAKAR., ADVOCATE)

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Digitally signed by THEJASKUMAR N Location: High Court of Karnataka

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AND:

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MR. CHARLES.H. S/O H.A.HARRY, AGED ABOUT 66 YEARS, NO.242, 3^RD MAIN, 6^TH CROSS, NEW KAVIKA LAYOUT, BAPUJINAGAR, BANGALORE-560 026.

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LABOUR OFFICER AND CONTROLLING AUTHORITY UNDER PAYMENT OF GRATUITY ACT 1972, SUB-DIVISION-3, BENGALURU, NO.45, 1^ST FLOOR, KARMIKA BHAWANA,

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NC: 2024:KHC:51990 WP No. 7670 of 2024

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BANNERGHATTA ROAD, NEAR DIARY CIRCLE, BENGALURU-560 029.

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…RESPONDENTS

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(BY SRI. RAMESH.S., ADVOCATE FOR R1; SRI. S.H.RAGHAVENDRA., AGA FOR R2)

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THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, SEEKING CERTAIN RELIEFS.

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THIS WRIT PETITION IS LISTED FOR DICTATION OF ORDERS, THIS DAY, AN ORDER IS MADE AS UNDER:

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ORAL ORDER

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Sri.Subramanya., counsel on behalf of Sri.B.C.Prabhakar., for the petitioner, Sri.Ramesh.S., counsel for respondent No.1 and Sri.Raghavendra., AGA for respondent No.2 have appeared in person.

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2. The short facts are these:

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Mr.Charles.H - the first respondent joined the services of the petitioner's Company on 06.03.1985. 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 Rs.8,17,020/-, whereas under the Payment of Gratuity Act, 1972, he was entitled to Gratuity of Rs.4,42,385/-.

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3 - NC: 2024:KHC:51990 WP No. 7670 of 2024

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The workman, Mr.Charles.H opted to receive the gratuity as per the Gratuity Fund Trust Rules. The petitioner Company deducted the income tax of Rs.1,15,763/- and remitted the same to the Income Tax Department. The workman received the balance of Rs.7,01,257/- without any demur.

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Thus, after a lapse of almost five years, the first respondent filed a claim application claiming a sum of Rs.4,08,385/-. 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.1,15,763/- 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.

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Counsel for the respective parties urged several contentions.

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NC: 2024:KHC:51990 WP No. 7670 of 2024

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Sri.Subramanya., counsel for the petitioner submits

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that the order of the Controlling Authority is arbitrary, illegal and without jurisdiction.

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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.

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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.

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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 five years.

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Lastly, he submits that viewed from any angle, the order of the Controlling Authority is untenable. Counsel, therefore,

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5 - NC: 2024:KHC:51990 WP No. 7670 of 2024

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submits that the order of the Controlling Authority is liable to be set aside and the Writ Petition may be allowed.

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Sri.Ramesh.S., counsel for respondent No.1 submits that the first respondent has filed an appeal before the Appellate Authority.

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Next, he submits that the petitioner should have preferred an appeal before the Appellate Authority. However, it has filed the present Writ Petition without availing the alternate statutory remedy.

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A further submission is made that the petitioner must seek refund of the Income Tax amount from the Income Tax Department.

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Counsel vehemently contended that the Ceiling limit was Rs.10,00,000/- and hence, the petitioner has erred in deducting the income tax amount.

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Lastly, he submits that the order of the Controlling Authority is well merited and fully justified and does not call for any interference by this Court. Accordingly, he prayed for the dismissal of the Writ Petition.

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6 - NC: 2024:KHC:51990 WP No. 7670 of 2024

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6. AGA submits that a detailed statement of objections

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is filed and the same may be taken note of. In presenting his arguments, AGA submitted that the petitioner has not availed the alternate remedy by filing an appeal before the Appellate Authority. Hence, he submits that the Writ Petition is not maintainable.

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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.

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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

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NC: 2024:KHC:51990 WP No. 7670 of 2024

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COMMISSIONER AND THE APPELLATE AUTHORITY UNDER THE PAYMENT OF GRATUITY ACT AND OTHERS .

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AGA vehemently contended that the Ceiling limit was Rs.10,00,000/- and hence, the petitioner has erred in deducting the income tax amount.

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Lastly, he submits that the Writ Petition is devoid of merits and the same may be dismissed.

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Heard the arguments and perused the Writ papers

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with care.

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The following points would require consideration.

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Whether the Controlling Authority is vested with the power to decide the issue about the refund of the Income Tax?

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Whether the Controlling Authority is justified in entertaining the application that was filed beyond the period of limitation?

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Whether the petitioner has made out good grounds to exercise power under Article 226?

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NC: 2024:KHC:51990 WP No. 7670 of 2024

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The issue revolves around a narrow compass and relates to the power/ authority of the Controlling Authority to decide about the tax exemption and pass an order to refund the income tax. Before I answer the points, let us quickly glance at the concept of Gratuity and income tax exemption.

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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.

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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.8,17,020/-. Since the gratuity was paid under the Private Trust Rules, the

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9 - NC: 2024:KHC:51990 WP No. 7670 of 2024

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management deducted the income tax of Rs.1,15,763/- 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.

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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 five years, he filed an application before the Controlling Authority contending that he is entitled to receive the balance of Gratuity amount of Rs.4,08,385/-. 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

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10 - NC: 2024:KHC:51990 WP No. 7670 of 2024

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view, the authority has unnecessarily tried to discuss much on the tax ceiling limit and erroneously went ahead with the matter.

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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.

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NC: 2024:KHC:51990 WP No. 7670 of 2024

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Next, let me answer about the delay. The petitioner paid the gratuity to the first respondent in 2012. However, he applied before the Controlling Authority claiming a difference in gratuity in 2017. 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 five years. In my view, the application ought to have been rejected on the grounds of delay and laches.

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Lastly, let me answer the objection about the existence of an alternate remedy and the exercise of power under Article 226 of the Constitution of India. A remedy under Article 226 in general is discretionary. The law is well-settled that the existence of an alternate remedy does not affect the jurisdiction of the Court to issue a writ in an appropriate case. Whether the alternate remedy is equally efficacious or adequate is a question of fact to be decided in each case and the onus is on the applicant/petitioner to show that it is adequate. In the present case, the petitioner has made out good grounds to hold that the Labor Officer has acted more than his authority to pass an order to refund the income tax.

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12 - NC: 2024:KHC:51990 WP No. 7670 of 2024

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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.

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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.

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The Writ of Certiorari is ordered. The order dated 05.12.2023 passed by the Controlling Authority in ¥ÀæPÀgÀt ¸ÀASÉå:PÁC¨ÉA-3/¦fJ/¹Dgï-72/2017-18 as far as directing the petitioner to refund the amount deducted towards income tax vide Annexure-C is quashed.

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Resultantly, the Writ Petition is allowed .

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Sd/(JYOTI MULIMANI) JUDGE

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TKN,MRP List No.: 1 Sl No.: 8

M/ S Astrazeneca Pharma India Ltd. v. Mr Charles H

Case brief

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M/ S Astrazeneca Pharma India Ltd. v. Mr Charles H

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