This Tax Alert summarizes a recent ruling of the Supreme Court (SC) in the case of Palam Gas Service (Taxpayer), wherein the issue before the SC was whether disallowance of expenses for failure to withhold taxes under the Indian Tax Laws (ITL) is applicable only in respect of expenses which remain “payable” or if it also covers expenses actually “paid” during the year without withholding of taxes.
The ITL provides for various consequences for failure to withhold taxes, which include disallowance of expenses “payable”, on which tax is deductible at source but such tax has not been deducted or, after deduction, has not been paid on or before the due date of filing return of income (disallowance provision).
Use of the expression “payable” in the disallowance provision gave rise to an issue of whether the disallowance applies only in respect of expenses remaining “payable” as on the last day of the tax year or whether it is also applicable in respect of expenses “paid” during the tax year without withholding tax. The High Courts (HC) were divided on this issue, but majority of the HCs held that disallowance is triggered even if expenses are “paid” during the tax year without withholding tax.
After taking note of the conflicting rulings of the HCs on the issue, the SC upheld the majority view that disallowance is triggered regardless of whether the amounts are “payable” or are actually paid during the tax year.
THE EMPLOYEE'S COMPENSATION (AMENDMENT) ACT, 2009 is the new name of THE WORKMEN'S COMPENSATION (AMENDMENT) ACT, 2009. Hence the words Workman/Workmen in the act require to be read as Employee.
The Compensation Payable on Death: Then INR 80000 and Now INR 120000
The compensation payable on permanent Total Disablement: Then INR 90000 and Now INR 140000
Actual monthly wages to be calculated without ceiling of INR 4000. In case of death, Max amount of claim compensation payable- INR 4.56lakh and for Permanent Disablement INR 5.58lakh
Definition of workmen replaced by "Definition of Employee"- also now includes CLERICAL employees
The principal Employer is responsible for making sure that the contractor is registered with WPFO before awarding contract. But On allotment of independent code number, a contractor acquires the status of ‘establishment’ and responsible for deposit of employee provident fund Contributions.
2012 LLR 702, Madras High Court Says, “With respect to the contractors, who are registered with the provident fund department, having the independent code number, they are to be treated as ‘independent employee’. The petitioner, therefore, cannot be treated to be ‘principal employer’ for the purpose of those contractors”.
For ESI contribution, even incentives are taken into consideration but what will you be the position when gratuity is to be calculated?
When it comes to gratuity, wages means basic plus dearness allowance and no other allowances including incentives.
The payment of incentives as paid to the employees is not wages under section 2(s) of the payment of gratuity act. Their Lordships observed that they have misunderstood the act and have wrongly held the concept of wages under the payment of gratuity act. If the payments have already made to respective employee by authorities, the same not going to be recovered
TalentPro is an India leader for HR related products and services. TalentPro brings
a spectrum of HR services that add value to our people, our clients, and all other
stake holders in our ecosystem.
Copyright © TalentProIndia 2016