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Special allowance to be included in basic wage for deduction of provident fund

March 4, 2019[2019] 103 taxmann.com 18 (SC)
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CL : Where allowances paid by establishment to its employees were essentially a part of basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to provident fund account of employees, order of authority under Employees' Provident Fund and Miscellaneous Provisions Act, 1952 that special allowance was to be included in basic wage for deduction of provident fund was justified

Facts

• Respondent, an unaided school, was giving special allowance by way of incentive to teaching and non-teaching staff pursuant to an agreement between staff and the management. The authority under Employees' Providing Fund and Miscellaneous Provisions Act, 1952 held that the special allowance was to be included in basic wage for deduction of provident fund.

Held that no material has been placed by the establishments to demonstrate that the allowances in question being paid to its employees were either variable or were linked to any incentive for production resulting in greater output by an employee and that the allowances in question were not paid across the board to all employees in a particular category or were being paid especially to those who avail the opportunity. In order that the amount goes beyond the basic wages, it has to be shown that the workman concerned had become eligible to get this extra amount beyond the normal work which he was otherwise required to put in. There is no data available on record to show what were the norms of work prescribed for those workmen during the relevant period. It is, therefore, not possible to ascertain whether extra amounts paid to the workmen were in fact paid for the extra work which had exceeded the normal output prescribed for the workmen. The wage structure and the components of salary have been examined on facts, both by the authority and the appellate authority under the Act, who have arrived at a factual conclusion that the allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund of the employees. The concurrent conclusions of facts that special allowances paid by an establishment to its employees would fall within expression 'basic wages' under section 2(b)(ii) read with section 6 for computation of deduction towards Provident Fund is not interfered with.

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