SEBI and Corporate Laws – July 15, 2019

38 SEBI & CORPORATE LAWS - MAGAZINE[Vol. 154

[2019] 154 SCL 38 (Mag.)/106taxmann.com 143 (Article)

SC RULING HOLDING ALLOWANCES AS PART OF BASIC

WAGE FOR DETERMINING PF CONTRIBUTION, WHETHER

CONTRADICTION WITH STAND OF LAWMAKERS?

Introduction

In

its

recent

judgment

in

the

case

of

RPFC

v.
Vivekananda
Vidyamandir

;

Surya Roshni Ltd.

v.
State of Madhya Pradesh
EPF RPFC

2019

LLR

339

(SC),

the

Hon’ble

Supreme

Court

has

held^

that

allowances

other

than

those

of

the

undermentioned

types^

are

to

be

considered

as

part

of

the

basic

wages

u/s.

2 (

b

)

of^

the

EPF

&

MP

Act,

1952 ,

for

the

purpose

of

determination

of^

PF

Contribution:

u

Allowances

which

are

variable

in

nature;

u

Allowances

which

are

linked

to

any

incentive

for

production

resulting

in

greater^

output

by

an

employee;

or

u

Allowances

which

are

not

paid

across

the

board

to

all

employees

in

a

particular^

category;

or

u

Allowances

which

are

paid

especially

to

those

who

avail

of

the

opportu

nity. -

Accordingly,

the

special

allowances,

conveyance/travelling

allowances,

ed

ucation -

allowances,

and

similar

allowances

in

the

cases

of

the

respective

petitioners,^

have

been

held

as

part

of

the

basic

wages,

liable

for

deduction

of

PF^

contribution.

In

arriving

at

the

conclusion,

the

Hon’ble

Supreme

Court

has

relied

upon

its

earlier^

judgments

in

the

cases

of

‘Bridge & Roof Company (India) Ltd.’

&
‘Ma-
nipal Academy of Higher Education’,

wherein

it

has

been

categorically

held

by^

the

Hon’ble

Supreme

Court

that

those

allowances

which

are

“universally,

necessarily^

and

ordinarily

paid

to

all

across

the

board”

are

to

be

considered

as^

basic

wages,

i.e

.,

only

those

allowances

which

are

paid

universally

to

all

the

employees^

in

all

the

establishments,

uniformly,

across

the

board,

without

any

discretion,^

and

not

just

in

some

establishments

on

case

to

case

basis,

are

to

be

considered^

as

part

of

basic

wages,

and

not

all

the

allowances.

It

appears

that

the

present

bench

of

the

Hon’ble

Supreme

Court

has

inter

preted -

the

said

expression

“universally,

necessarily

and

ordinarily

paid

to

all

across^

the

board”

in

the

context

of

individual

establishments

only

and

not

in

the^

context

of

the

entire

industry

as

a

whole.

Thus,

in

view

of

the

principle

of

natural^

justice

and

fair

play

and

far

reaching

implications

of

disturbing

the

MAYANK

MOHANKA*

*CA.