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Issues: (i) Whether the employer was justified in deducting income tax from the sum of Rs. 20,000 directed to be paid to the workman as compensation in lieu of reinstatement. (ii) Whether the workman was entitled to back wages in addition to the sum of Rs. 20,000 awarded as compensation in lieu of reinstatement.
Issue (i): Whether the employer was justified in deducting income tax from the sum of Rs. 20,000 directed to be paid to the workman as compensation in lieu of reinstatement.
Analysis: The operative direction required payment of a lump sum of Rs. 20,000 without deduction. The amount was paid after sub-section (10B) of section 10 of the Income-tax Act, 1961 had come into force, and compensation received by a workman at the time of retrenchment within the statutory limit was exempt. The direction of the Court also indicated that any tax burden, if arising, was to be borne by the employer.
Conclusion: The deduction of income tax was unjustified and the employer was liable to restore the deducted amount.
Issue (ii): Whether the workman was entitled to back wages in addition to the sum of Rs. 20,000 awarded as compensation in lieu of reinstatement.
Analysis: The earlier operative order showed that the sum of Rs. 20,000 was awarded only in lieu of reinstatement, not in lieu of reinstatement and back wages. The earlier award of back wages stood on a separate footing, and the employer remained bound to pay back wages for the relevant period over and above the compensation amount.
Conclusion: The workman was entitled to back wages in addition to the sum of Rs. 20,000.
Final Conclusion: The workman succeeded on both issues, and the employer was directed to pay the deducted tax amount with interest as well as additional back wages and costs.
Ratio Decidendi: A lump-sum compensation ordered in lieu of reinstatement must be given effect according to its operative terms, and where the governing tax exemption applies, no deduction can be made from that amount; back wages are payable separately if they are not included in the compensation itself.
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