P.M. Boricha vs Senior Regional Manager, Food Corporation of India and Others

M.B. Shah, J.—The petitioner who is the Regional Secretary of the Food Corporation of India Employees Union has filed this petition

wherein he has prayed that respondent No. 1 - Senior Regional manager, Food Corporation of India, be directed not to deduct profession tax

from the arrears of salary which are paid to the employees on the basis of pay revision and revision of dearness allowance for the period

commencing from August 1, 1983, to July 31, 1987, in pursuance of the settlement dated march 22, 1989. The arrears of salary and dearness

allowance are required to be paid from August, 1983, to March 1989.

Mr. Raval, learned advocate appearing on behalf of the petitioner, vehemently submitted that the Gujarat State Tax on Professions, Trades,

Callings and Employments Act, 1976, nowhere provides for deduction of profession tax on arrears of salary which are to be paid in a lump sum

and not on a regular basis. For this purpose, he relies upon section 2(g) of the Act which reads as under :

''salary'' or ''wage'' includes pay or wages, dearness allowance and all other remuneration received by any person on regular basis, whether

payable in cash or kind, and also includes perquisites, and profits in lieu of salary, as defined in section 17 of the Income Tax Act, 1961.

He further relied upon the decision of the Karnataka High Court in the case of Karnataka Bank Ltd. v. Assistant Profession Tax Officer, AIR

1989 Kar, 204, wherein the court has held that the definition of ""salary"" or ""wages"" used in the section does not include arrears of salary.

As against this, Mr. Thakkar, learned advocate appearing on behalf of respondents Nos. 1 and 2, vehemently submitted that the lump sum

amount which is paid to the employees is the difference of salary per month which was required to be paid to the employees from August, 1983,

onwards. He further referred to Schedule I of the Act which provides the rates of tax on professions, trades, callings and employments.

For deciding this controversy, it would be necessary to refer to section 3 of the Act which is the charging section which reads as under :

(1) Subject to the provisions of article 276 of the Constitution and of this Act, there shall be levied and collected a tax on professions, traders,

callings and employments for the benefit of the State.

Every person engaged in any profession, trade, calling or employment and falling under one or the other of the classes mentioned in column 2 of

Schedule I shall be liable to pay to the State Government the tax at the rate mentioned against the class of such person in column 3 of the said

Schedule :

Provided that the tax so payable in respect of any one person shall not exceed two hundred and fifty rupees in any year :

Provided further that entry 9 in Schedule I shall apply only to such classes of persons as may be specified by the State Government, by notification

in the Official Gazette, from time to time.

Schedule I provides rate of tax on professions, trades, callings and employments. Explanation 1 to item No. 1 reads as under :

Explanation 1. - Where any salary or wages are payable according to any period other than a month, the monthly salary or wages shall, for the

purpose of this entry, be reckoned on the basis of the actual amount of salary or wages paid or payable for a month.

Admittedly, the members of the petitioner-union are employees of the respondent-Food Corporation of India.

Section 4 of the Act provides that it would be the employer''s liability to deduct and pay tax on behalf of the employees on the basis of salary or

wage before such salary or wage is paid to the employee. It also provides that such employer shall, irrespective of whether such deduction has

been made or not, when the salary or wage is paid to such person, be liable to pay tax on behalf of all such persons. Reading sections 3 and 4

together, it can be said that every person engaged in any profession, trade, calling or employment, falling under one or the other class mentioned in

the said Schedule. If he is an employee, then it is the duty of the employer to deduct the said tax from his salary or wage. Further, even if the

employer fails to deduct the tax from salary or wage, yet it is the liability of the employer to pay tax on behalf of all employees.

The question in this petition is whether the arrears of salary which the petitioners are getting would be covered by the provisions of section 3

read with Schedule I to the Act or not. The word ""arrears"" of salary itself indicates that the amount which was required to be paid as salary on the

due dates was not paid to the concerned employees but is paid subsequently. That means that part of the salary or the salary which was required

to be paid every month was not paid at that time. The definition given in the Law Lexicon of the word ""arrears"" is as under :

Arrears.-Money not paid on the due date or proper time for payment (as) arrears of rent (Connell). That which is behind in payment, or which

remains unpaid though due.

The definition of ''arrears'' involves the idea not merely of money unpaid, but of money unpaid at the due time. the term ''arrears'' involves the

existence of some default on the part of the debtor.

Therefore, the amount which is paid to the petitioners is paid as ""salary"" which was required to be paid to them on the due date. As it is part of

the salary, the respondents are required to deduct it from the employees'' salary u/s 4 of the Act.

However, Mr. Raval, learned advocate appearing on behalf of the petitioner, submitted that the words ""salary"" or ""wage"" are defined u/s 2(g)

of the Act and it only provides that ""salary"" or ""wage"" includes pay or wages, dearness allowance and all other remuneration received by any

person on a regular basis. As the petitioners are not getting arrears of salary cannot be included and said to be part of the salary from which tax

can be deducted.

In my view, this submission cannot be accepted. Arrears of salary are paid to the employees on the ground that employees were entitled to

have that amount of salary for a particular month or months on a regular basis but that amount was not paid to them on the due date or dates.

Therefore, arrears of salary are a part of the salary which was required to be paid to the employees every month. It is true that in the case of

Karnataka Bank Ltd. v. Assistant Profession Tax Officer AIR 1989 Kar 204, the Karnataka High Court has held that as the arrears of salary are

not included in the section which defines salary or wage and as it is included under the Income Tax Act, therefore, no tax on arrears of salary can

be levied. With respect, it is difficult to accept the said proposition. By an inclusive definition, the meaning of ""salary"" or ""wage"" is extended, but

that does not mean that it has limited its ordinary meaning. Its ordinary meaning is retained. Only its scope is widened. From this inclusive definition,

it cannot be said that the Legislature has provided that ""salary"" or ""wage"" would only mean what is stated while giving the extended meaning. While

retaining the ordinary meaning by including certain aspects, extended meaning is given to the said words. The word ""includes"" is a word of

enlargement rather than of restriction and it cannot be taken to be exhaustive considering the context in which it is used in section 2(g) of the Act.

As stated above, arrears of salary are part of the salary which was required to be paid to the employee on the due date but was not paid for some

reasons. Because arrears are paid after some time, it would not lose its character as salary. In any set of circumstances, the Explanation to

Schedule I specifically provides that where any salary or wages are payable according to any period other than a month, the monthly salary or

wage shall, for the purpose of this entry, be reckoned on the basis of the actual amount of salary or wages paid or payable for a month. So, this

Explanation would take care of the situation where arrears of salary are paid after lapse of some period. In the affidavit-in-reply, it has been

pointed out that Class III and IV employees are paid under revised pay scales, dearness allowance and other benefits from August 1, 1983, as per

the memorandum dated January 1989. That means that from August 1, 1983, the employees were required to be paid a certain amount as salary

regularly every month but it was not paid and is paid as arrears of salary.

Hence, the action of respondent No. 1 of deducting profession tax from the arrears of salary cannot be said to be in any way arbitrary or illegal

and, therefore, there is no question of directing respondent No. 1 or 2 to refund the said amount. In this view of the matter, there is no substance in

this petition and it is rejected. Notice discharged.