Case Law Details
CA Sandeep Kanoi
As far as the expression ‘gratuity’ is concerned, there is no definition of what ‘gratuity’ is, even under the Payment of Gratuity Act; yet, a monetary relief to an employee at the time of his retirement or termination of service is treated as ‘gratuity’. Section 4 of the Payment of Gratuity Act enjoins on the employer to pay gratuity to an employee on the termination of his employment after he has rendered continuous service for not less than 5 years on the employee attaining superannuation or retirement or resignation or on his death or disablement or due to accident or disease. The payment of gratuity itself is calculated based on the number of years of service put in by the employee, calculated at the rate of 15 days wages based on the rate of wages last drawn by the employee concerned.
A reading of the provisions of the Payment of Gratuity Act shows that it is a complete code containing detailed provisions covering all the essential features of a scheme for payment of gratuity. In the decision reported in (2004) 1 SCC 755 = AIR 2004 SC 1426 (Ahmedabad Pvt. Primary Teachers’ Assn. V. Administrative Officer), the Supreme Court held that gratuity in its etymological sense is a gift, especially for services rendered, or return for favours received. The Apex Court pointed out that the main purpose and concept of gratuity is to help the workman after retirement, whether retirement is a result of rules of superannuation or physical disablement or impairment of vital part of the body. The expression ‘gratuity’ itself suggests that it is a gratuitous payment given to an employee on discharge, superannuation or death. Gratuity is an amount paid unconnected with any consideration and not resting upon it and has to be considered as something given freely, voluntarily or without recompense. It is a sort of financial assistance to tide over post-retiral hardships and inconveniences.
In the background of the meaning given to the word ‘gratuity’, when we look into the agreement between the employee union and the employer, we find that the scheme seems to be in vogue for quite sometime even before this accounting year relevant to this assessment year and as far as the relevant assessment year under consideration is concerned, the scheme which had come into existence from 01.01.1997 would be relevant. As per this, at the time of retirement or superannuation or relieving from his employment, an employee shall be entitled to a payment based on the service weightage, the payment being the last drawn salary multiplied by 3 days and the number of years put in by the employee. Admittedly, the scheme is not a recognised one, but one reached as per the agreement between the parties. It is not denied by the assessee that a provision was made in the accounts as regards the gratuity payable based on the service weightage. Being a provision made for payment of gratuity to the employees on the retirement or termination of their employment, the claim stands clearly hit by Section 40A(7)(a) of the Income Tax Act.
Learned counsel appearing for the assessee submitted that in the grounds of appeal filed before this Court, the Department had contended that service weightage is neither a gratuity, nor a payment to any welfare fund and at best constitute only a provision which is to be disallowed. A question of law to that end was also raised as to whether on the facts and in the circumstances of the case, the Income Tax Tribunal was right in law in not considering that the amount paid to service weightage is neither a gratuity, nor a payment to any welfare fund and at best only a provision in the nature of a contingent liability and therefore to be disallowed? In the background of the ground thus raised, learned counsel appearing for the assessee submitted that it is not open to the Revenue to contend otherwise to somehow bring the case of the assessee under one of the clauses under Section 40A of the Income Tax Act. Thus, learned counsel submitted that it is not open to the Revenue to go against what had been raised as a question in the grounds of appeal before this Court.
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can service weightage for year of services rendered for promotion for acquiring professional qualification beyond a period prescribed by management be denied to an employee
Further can service weightage for year of services rendered for promotion for acquiring professional qualification within a period prescribed by management be twice to an employee i.e. once at the level of non executive level for promotion to executive level-I and another at time of promotion to the executive level-II for the same professional qualification which was acquired at the level of non executive level an utilized for promotion to executive level