Chennai: Holding that the severance package paid to the employees of Hindustan Photo Film Manufacturing Company Ltd, in Udhagamandalam, a public sector undertaking wholly owned by the Central government, which was wound up, is a special privilege/protection to employees, Madras high court has ruled that income tax cannot be deducted from the package.
Partly allowing a petition from Hindustan Photo Film Workers' Welfare Centre, Justice T.S. Sivagnanam said the amount deducted as income tax shall be disbursed to the employees by the authorities.
As agreed by the employees of HPF, all employees on receipt of the severance packages shall vacate and hand over vacant possession of the quarters in Udhagamandalam within one month, the judge added.
The judge said the Union government had recommended a scheme to give relief to employees of HPF. This proposal was approved by the Cabinet Committee on Economic Affairs and such approval was a non-plan budgetary support.
The Union government did not authorise HPF to bring out a Voluntary Retirement Scheme (VRS) package, but what was approved was a non-plan budgetary support. The purpose was to rehabilitate employees of HPF and the reason being that the employees have been receiving pay scales as of 1987, the increase in the cost of living has made it very difficult for them to survive and meet their financial obligations and the government thought it fit to offer this package to enable employees to come out of the financial crisis.
If such was the sanction made by the Centre, it undoubtedly would qualify the parameters laid down under sub-section (10B) of section 10 of the Income Tax Act (Income not included in total income). Therefore, the amount would be exempted, judge added.
