KARNATAKA STATE ROAD TRANSPORT CORPORATION vs. THE DEPUTY LABOUR COMMISSIONER

1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 26TH DAY OF JUNE, 2012 BEFORE THE HON’BLE MR. JUSTICE ARAVIND KUMAR W.P.NO.18946/2010 (L-KSRTC) BETWEEN: Karnataka State Road Transport Corporation, Bangalore Central Division, Bangalore by its Divisional Controller Represented by its Chief Law officer ..PETITIONER (BY SMT.S.NIRMMALA, ADVOCATE) AND: 1. The Deputy Labour Commissioner And the Appellate Authority Under the payment of Gratuity Act Bangalore, Region –2 Karmeeka Bhawan, Banneragatta Road, Bangalore – 560026 2. The Assistant Labour Commissioner And Controlling Authority Under the payment of Gratuity Act Division –4

2 Karmeeka Bhawan, Banneragatta Road, Bangalore – 560 026. 3. H.Shivalingaiah S/o Hottegowda Konnapura Halagur Hobli, Malavalli Taluk, Mandya. ..RESPONDENTS (BY SMT.SUVARNA, ADVOCATE FOR SRI.L.SHEKAR FOR R- 3, SRI.JAGADEESH MUNDARAGI, AGA FOR R-1 AND 2) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDERS PASSED BY THE SECOND RESPONDENT DATED 16.04.2009 (ANNEXURE-A) AND ORDER PASSED BY THE FIRST RESPONDENT DATED 29.03.2010 (ANNEXURE-C). THIS WRIT PETITION COMING ON FOR HEARING THIS DAY, THE COURT MADE THE FOLLOWING: O R D E R Heard Smt.S.Nirmmala, learned counsel appearing for petitioner, Smt.Suvarna, learned counsel appearing on behalf of Sri.L.Shekar for respondent No.3 and Sri.Jagadeesh Mundaragi, learned Additional Government Advocate appearing for respondents 1 and 2. Perused the impugned order.

3 2. On account of difference in payment of gratuity amount, petitioner filed an application before competent authority for grant of said amount and controlling authority by order dated 16.04.2009 allowed the application filed by petitioner determining the total gratuity payable by the petitioner-corporation at `4,59,078/- and if not paid within 30 days simple interest at 10% p.a. was granted. Aggrieved by this order corporation preferred an appeal before first respondent and appellate authority by order dated 29.03.2010 has rejected the said appeal. Aggrieved by the said orders, petitioner is before this court questioning these two orders. 3. It is the contention of Smt.Nirmmala, learned counsel appearing for petitioner-corporation that corporation had determined the total number of active service of petitioner rendered at 28 years 11 months after giving deduction of 4 years 6 months and 12 days towards unauthorised absence,

4 leave without wages and suspension period and by taking into consideration the last basic pay at `13,738/- and thereafter determined the total amount of gratuity payable at `3,97,257/- and income tax payable on said amount at `27,983/- plus `600/- towards group insurance and identity card was deducted and thus a total sum of `3,68,674/- has been paid to third respondent-workman and contends that the controlling authority as well as appellate authority erred in not taking into consideration the register produced by corporation which came to be marked as Exhibit –R-1 which would clearly go to show that workman was unauthorisedly absent for the said period of 4 years, 6 months and 12 days and non consideration of these vital document has resulted in great prejudice to the petitioner. She would elaborate her submission by contending that corporation ought to deduct an amount of `27,983/- under Income Tax Act, 1961 and same has been deducted which cannot be found fault with and this aspect has not been taken into consideration by controlling authority as well as appellate authority which has

5 resulted in direction being issued to corporation to pay `90,404/- which the corporation is not liable to pay and as such she seeks for quashing of the impugned orders and for allowing the writ petition. 4. Per contra, Smt.Suvarna, learned counsel appearing for respondent no.3 would submit that petitioner-corporation did not produce any orders passed against third respondent declaring the period of absence as unauthorised and in the absence of the same controlling authority as well as appellate authority have rightly rejected the claim of the corporation to deduct the said period from out of total active service and contends that there is no error in the said finding. She would also contend that corporation was not entitled to deduct the income tax amount from and out of the gratuity payable and as such said deduction made is liable to be made good by corporation to the respondent No.3. She also seeks for confirming the orders passed by respondents 1 and 2 and prays for dismissal of the writ petition.

6 5.

Sri.Jagadeesh Mundaragi, learned Additional Government Advocate would also support the orders passed by the authorities and submits that by taking into consideration the entire facts as well as evidence, orders are passed which does not suffer from any infirmity and as such he seeks for dismissal of the writ petition. 6. Having heard the learned advocates appearing for parties and on perusal of the impugned orders, point that arise for my consideration is as follows: “(1) Whether the order of the controlling authority as affirmed by the appellate authority requires to be confirmed, set aside or modified? (2) What order?” 7. Third respondent joined the services of the corporation in the year 1974 and on attaining the age of

7 superannuation retired from services on 31.08.2007. Petitioner/employer determined the gratuity payable to the third respondent as under: Number of active years of service 28 years 11 months Last basic pay `13,738/- `13,738 X 28.11 = `3,97,257/- While arriving at the above period service of 4 years 6 months and 12 days rendered by third respondent has been deducted from out of the total number of years of service i.e., 33 years 5 months and 17 days and then arrived at active years of service at 28 years 11 months. Corporation also found that amount of gratuity payable under the Gratuity Act, was `2,53,855/- and the gratuity payable under the regulation being more beneficial to the employee, said amount was determined. From out of the said amount deductions have been made as under:

8 (a) Total amount of gratuity determined ` 3,97,257 (b) deduction towards income tax ` 27,983 (c) deduction towards group insurance & Identity card (400+200) ` 600 ------------- (d) Total deductions = (b) + (c) ` 28,583 --------------- Balance amount payable ` 3,68,674 ========== It is not in dispute that said amount of `3,68,674/- has been paid by the corporation to third respondent and this fact is also not disputed by learned counsel appearing for respondent no.3 before this court. 8. The point of controversy between the `employee’ and `corporation’ revolves under deduction made under two heads namely: (1) Income Tax (2) Number of years of active service taken into consideration i.e., 4 years 6 months 12 days deducted as unauthorised absence, leave without wages and suspension period.

9 Re: Deduction towards Income tax: This court in the case of NWKRTC Vs Deputy Labour Commissioner and others in W.P.5759/2006 disposed of on 25.02.2008 has held that deduction of income tax on the gratuity amount to the extent of ceiling amount is alone exempted and beyond that the same tax is liable to be paid. In that view of the matter the deduction made by the petitioner-corporation from out of the gratuity amount payable to third respondent cannot be sustained. However, it is to be noticed that Central Government from time to time has issued the notification fixing the ceiling limit to the extent of which income tax on gratuity amount would not be attracted. In that view of the matter corporation shall be entitled to deduct income tax only to the extent of prescribed limit. Corporation shall ascertain from the Income Tax Department as to the extent of gratuity amount that was being available to a employee for tax exemption in respect of gratuity payable as per section 10 of the Income Tax Act,

10 1961 and to the said extent alone petitioner-corporation would be entitled to deduct the income tax amount and pay the balance amount to third respondent. Said exercise shall be done by the corporation within a period of three months from the date of receipt of certified copy of this order and pay the said amount within 15 days thereafter to third respondent. In so far as deduction of `600/- made by the corporation towards group insurance and providing identity card is concerned, said deduction also cannot be permitted in view of absolute bar under section 14 of the Gratuity Act. Said deduction also deserves to be rejected and that is what has been done by the controlling authority and appellate authority which cannot be found fault with. RE: Break in Service: On the one hand petitioner-corporation claims that 4 years 6 months and 12 days is to be deducted from the total

11 active service rendered by third respondent which admittedly is 33 years 5 months, 17 days. Section 2A of the Gratuity Act defines `Continuous Service’ which reads as under: 2A Continuous Service:- “(1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act”. 9. Petitioner-corporation contended that there was unauthorised absence, leave without wages and suspension period was required to be deducted which in all is 4 years, 6 months, 12 days from out of the active service of third respondent. Admittedly petitioner-corporation did not produce the orders passed against third respondent-workman for these periods of absence. On the other hand by producing

12 a ledger extract and getting it marked as Exhibit R-1 corporation claim that infact there were such orders passed. In the absence of details forthcoming from the register and on account of non production of orders passed against respondent No.3 towards unauthorised absence if any. Controlling authority as well as appellate authority have rightly rejected the said contention of the corporation by taking into consideration the definition of the word `continuous service’ and holding that there is no interruption in service rendered by third respondent. Said finding is based on scrutiny of records and not being contrary to Exhibit R-1, I do not find any other good ground to interfere with the said finding in exercise of writ jurisdiction. In that view of the matter the finding of the controlling authority by taking active years of service at 33 years 5 months deserves to be accepted. 10. Thus, the total gratuity payable to third respondent by petitioner-corporation would be as under: (a) active years of service 33 years 5 months

13 (b) last basic wage `13,738/- `13,738 X 33.5 = `4,59,078/-(Rupees Four Lakhs Fifty Nine Thousand Seventy Eight Only). In view of the same, gratuity payable by the petitioner-corporation to third respondent would be `4,59,078/- minus income tax which would be in accordance with law and finding given herein above. In the result following order is passed: ORDER 1. Writ petition is allowed in part. 2. Petitioner Corporation shall ascertain from the office of the Commissioner of Income Tax, the income tax deductable on the gratuity amount prevalent during the said relevant period and pay the balance amount to third respondent from out of the amount already deposited before the controlling authority.

14 3. However, Controlling authority shall forthwith pay the difference of gratuity in so far as active years of service is concerned and amount that has been deducted towards group insurance and identity card charges as determined herein above to the third respondent forthwith. 4. No order as to costs. Ordered accordingly. Sd/- JUDGE SBN