Delhi High Court
Case BriefsHigh Courts

Delhi High Court: On a question of law before the Court that whether the Income Tax Appellate Tribunal (‘ITAT’) erred in law in holding that the difference between the price at which stock options were offered to employees of the appellant company under ESOP and ESPS and the prevailing market price of the stock on the date of grant of such options was not allowable revenue expenditure under Section 37(1) of Income Tax Act, 1961, (‘IT Act’), a Division Bench of Manmohan and Manmeet Pritam Singh Arora, JJ., sets aside the impugned order and held that an assessee is entitled to claim deduction under Section 37 IT Act, 1961, if the expenditure has been incurred, thus, issuance of shares at a discount where the assessee absorbs the difference between the price at which it is issued, and the market value of the shares would also be expenditure incurred for the purposes of Section 37(1) of IT Act.

Reliance was placed on Commissioner of Income Tax v. Biocon Ltd. I.T.A. NO. 653 OF 2013 (Karnataka), wherein it was held

“2. The shares of the company were transferred to the trust at the face value and the employees of the assessee were allowed to exercise the option to buy the shares within the time prescribed under the scheme subject to the terms and conditions mentioned therein. The assessee claimed the difference of market price and allotment price as a discount and claimed the same as an expenditure under Section 37 of the Act. The Assessing Officer rejected the claim on the ground that the assessee has not incurred any expenditure and the expenditure is contingent in nature and therefore, the assessee is not entitled to claim the difference between the market price and the allotment price as an expenditure under Section 37 of the Act. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 13.11.2009 dismissed the appeal preferred by the assessee.

10. From perusal of Section 37(1), which has been referred to supra, it is evident that an assessee is entitled to claim deduction under the aforesaid provision if the expenditure has been incurred. The expression ‘expenditure’ will also include a loss and therefore, issuance of shares at a discount where the assessee absorbs the difference between the price at which it is issued and the market value of the shares would also be expenditure incurred for the purposes of Section 37(1) of the Act. The primary object of the aforesaid exercise is not to waste capital but to earn profits by securing consistent services of the employees and therefore, the same cannot be construed as short receipt of capital.

Thus, the Court held that the Income Tax Appellate Tribunal erred in law in holding that the difference between the price at which stock options were offered to employees of the appellant company under ESOP and ESPS and the prevailing market price of the stock on the date of grant of such options was not allowable revenue expenditure under Section 37(1) of the Income Tax Act, 1961.

[PVR ltd. V. Commissioner of Income Tax, ITA 564 of 2012, decided on 23-08-2022]


Advocates who appeared in this case :

Mr. Salil Kapoor and Mr. Sumit Lalchandani, Advocates, for the Appellant;

Mr. Sanjay Kumar and Ms. Easha Kadian, Advocates, for the Respondent.


*Arunima Bose, Editorial Assistant has put this report together.

Income Tax Appellate Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal (ITAT): While deciding the instant appeal wherein the relevant question arose that whether the interest paid on late payment of TDS after deduction can be claimed as expenditure for determining the taxable income; the Bench of A.D. Jain (Vice President) and Dr B.R.R Kumar (Accountant Member) examined the issue of allowability as per the provisions of Income Tax Act and various judicial pronouncements. The Bench held that interest payment on late payment of TDS is not eligible business expenditure for deduction and it is not compensatory in nature. Payment of interest on late deposit of TDS levied under Section 201(1-A) is neither an expenditure only and exclusively incurred for the purpose of the business and therefore the same is not allowable as deduction u/s 37(1) of the Act.

Facts of the case: The assessee via its letter dated 12-03-2015 submitted copy of ledger account of interest on TDS. The assessee itself agreed that interest on TDS amounting to Rs. 9,70,248 was not added back in the computation of income. Interest on TDS is not allowable as per provision of Income Tax Act, 1961. Accordingly, expenses of Rs. 9,70,248 were disallowed and added back to the income of the assessee.

Observations: The Tribunal considered the question of allowability notwithstanding the contentions of the assessee before the Revenue. Some of the salient observations made by the Bench are as follows-

  • Section 201(1-A) of the Income Tax Act mandates assessee to pay simple interest at 1.5% per month or part of the month in case of delay in remittance of TDS amount deducted, to the treasury of the Central Government. For claiming expenditure and arriving at the taxable income, the Income Tax Act states twin conditions – allowance of expenditure as per Sections 30 to 37 and non-allowable expenditure as per Sections 40, 43B. The same are applicable for claiming the interest paid on late remittance of TDS.

  • Interest as defined in Section 2(28A) of Income Tax Act means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. Section 36(1)(iii) of the Act provides deduction of the interest paid in respect of capital borrowed for the purpose of the business or profession.

  • Interest on late payment of TDS is not covered under Sections 30-36 of the Act and thus qualifies for consideration under Section 37. It is neither capital expenditure nor personal expenditure of the Assessee. The Tribunal pointed out that Courts have time and again held that interest expenses on late payment of taxes which are compensatory in nature, should be treated as expended wholly and exclusively for the purposes of the business or profession, since responsibility of payment of taxes including deduction and remittance of TDS is part and parcel of the business operations and the assessee has no right to utilize such monies collected from others on behalf of the government.

  • The Tribunal relied on the judicial pronouncements of Lachmandas Mathuradas v. CIT, (2002) 254 ITR 799; Commissioner of Income-Tax v. Chennai Properties and Investment Ltd., 1998 SCC OnLine Mad 1095; Velankani Information Systems Ltd. v. CIT, 2018 SCC OnLine ITAT 17731 wherein the issues vis-à-vis disallowance of interest on TDS payments were addressed. The Tribunal observed that, “Payment of interest takes colour from the nature of the levy with reference to which such interest is paid and the tax required to be but not paid in time, which renders the assessee liable for payment of interest was in the nature of a direct tax and similar to the income-tax payable under the Income Tax Act. The interest paid under Section 201(1A) of the Act, therefore, would not assume the character of business expenditure and cannot be regarded as a compensatory payment”.

[Universal Energies Ltd. v. DCIT, ITA No. 2761/Del/2018, decided on 26-07-2022]


Advocates appearing in the case

Assessee by: Sudesh Garg, Adv. and Sahil Aggarwal, CA

Revenue by:  K. A. Manu, Sr. DR


*Sucheta Sarkar, Editorial Assistant has prepared this brief.

 

 

Income Tax Appellate Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal (ITAT), Bangalore: The coram of N.V. Vasudevan (Vice President) and Padmavathy S. (Accountant Member), considered the instant appeal, wherein, the issue that came to the forefront was when can a loss due to embezzlement, be allowed as a deduction during computation of income tax. It was held that the loss should be allowed as a deduction in the year in which the embezzlement was discovered.

Facts and Submissions: Relating to the Assessment Year 2011-12, the matter concerned a District Central Co-operative Bank [Assessee]. The assessee had been conducting the banking business governed by Karnataka State Co-operative Societies Act, 1959 and the rules and regulations of NABARD and RBI Guidelines for Banking activities. The assessee had debited an amount of Rs.7,50,99,000/- as provision for misappropriation in the P&L [profit and loss] account and computed income from business after such deduction.

The assessee had reduced this amount from loans and advances in the balance sheet. It was explained by the assessee that the Co-op Department of Government of Karnataka conducted an enquiry on misappropriation in one of assessee’s branch at Honalli. The assessee submitted that a fraud occurred in the bank and was under enquiry by the Co-operative Societies Enquiry Office as per the provisions of S. 64 of Karnataka Co-operative Societies Act, 1959. It is very difficult to recover the amount misappropriated, as such a recovery depends upon the enquiry report as per the afore-mentioned provision.

The Assessing Officer [A.O.] however, had a contrary opinion after examining the assessee’s claim and held that there was a reasonable prospect of getting the misappropriated amount back since, the bank has already attached the assets of the persons who indulged in fraud.

Aggrieved by the order of the AO, the assessee preferred appeal before the Commissioner Income Tax (Appeals). The CIT(A) deleted the addition made by the AO and held that the assessee is entitled to claim deduction of bad debts purely based on mere write- off. Aggrieved by this decision, the Revenue preferred the instant appeal.

Observations and Decision: Upon perusing the facts and submissions, the Tribunal observed that the CIT(A) had proceeded on an erroneous presumption that the sum claimed as a deduction was on account of write- off bad debts; the presumption being factually wrong because it was a case of embezzlement by the employee of the assessee which resulted in a loss to the bank.

The Tribunal then pointed out that neither A.O. nor the CIT (A) had considered a crucial question as to when a deduction on account of a loss due to embezzlement can be allowed as a deduction. The Tribunal noted that the Central Board of Direct Taxes issued a Circular- No. 35-D (XLVII-20) [F. No. 10/48/65-1T(A-0], dt. 24-11-1965, which specifically pertains to the query raised by the Tribunal. Upon examining clause-1 of the Circular, the Tribunal pointed out that loss due to embezzlement by employees should be treated as a loss incidental to business.

It was thus noted by the Tribunal that there is no doubt that the assessee suffered a loss on account of embezzlement, in the sense that a fraud was carried out in one of its branches. Therefore, as per the afore-mentioned CBDT Circular, the loss by the assessee should be allowed as a deduction.

The Tribunal decided that since the above aspect was not examined by anyone involved in the matter (assessee or A.O. or CIT), it is appropriate that the A.O. considers the matter afresh in the light of the referred CBDT circular, only on the question as to in which year the loss has to be allowed as a deduction. The Tribunal also directed the A.O. to allow deduction in the year in which the embezzlement by the employee was discovered by the assessee.

The appeal of the Revenue was allowed for statistical purposes.

[ACIT v. Davangere District Central Co-op Bank Ltd., 2022 SCC OnLine ITAT 264, decided on 17-06-2022]


Advocates who appeared in this case :

Sanjay Kumar S. K, CIT(DR)(ITAT), for the Revenue;

Suresh Muthukrishnan, CA, for the Assessee.


*Sucheta Sarkar, Editorial Assistant has reported this brief.

Madras High Court
Case BriefsHigh Courts

Madras High Court: A Division Bench of R Mahadevan and Sathya Narayan Prasad, JJ. dismissed the tax appeal holding that guarantee commission as well as royalty must be excluded from the business profit for the purpose of calculation of deduction under Section 80 HHC of the Income Tax Act, 1961. 

 

The facts of the case are such that the appellant was engaged in the business of manufacture and sale of V & Fan Belts, Oil Seals etc. For the assessment year 2004-2005, they filed its return admitting a total income of Rs.14, 02, 65,870/-, which was subsequently, revised by them. Upon scrutiny of the same, the respondent issued notice under section 143(2) of the Income Tax Act, 1961 (hereinafter, “the Act”) and thereafter, completed the assessment under section 143(3) determining the total income which excludes long term capital gains. While doing so, the assessing officer, among others, restricted the claim of deduction under Section 80HHC by excluding 90% of the royalty receipts from the profits of the business under clause (baa) to explanation to section 80HHC (4). The order of AO was challenged before the Commissioner of Income Tax Madurai, who partly allowed the appeal. Aggrieved by this, the Revenue filed an appeal before the Income Tax Appellate Tribunal (‘ITAT’) which thereby set aside the impugned order. Assailing this, the present tax appeal was filed under Section 260 A of the Income Tax Act, 1961. 

 

Counsel for appellants submitted that the appellant entered into a MOU with its 100% subsidiary company; the subsidiary company manufactures the goods as per the specifications given by the appellant and the appellant has also provided know-how, secret formula manufacturing process and methods to ensure the same quality of manufactured goods; for providing these services, the subsidiary company paid royalty and hence, the royalty receipts are directly related to the goods exported by the appellant and the same cannot be excluded from the profits of the business. 

  

The Court relied on CIT v. Bangalore Clothing Co., 2003 SCC OnLine Bom 40 , wherein it was categorically held that “guarantee commission as well as royalty viz., a payment for using a right, must be excluded from the business profit for the purpose of calculation of deduction under section 80HHC of the Act. 

  

The Court noted that there is no concrete material produced by the appellant / assessee to prove that the royalty income received from the subsidiary company is related to export business,  

  

Thus, the court held the “Tribunal has rightly directed the assessing officer to exclude the royalty income from the business profits for the purpose of calculation of deduction under section 80HHC of the Act, which warrants no interference.” 

[Fenner India Ltd. v. Assistant Commissioner of Income Tax, 2022 SCC OnLine Mad 2923 , decided on 08-06-2022] 

 

Appearances 

For Appellant: Mr. Subbaraya Aiyar 

For Respondent: Mr.M. Swaminathan, and Mrs. V. Pushpa 

 


*Arunima Bose, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: The Division Bench of R. Subhash Reddy* and Hrishikesh Roy, JJ., held that to determine State Monopoly for disallowance of certain fee, charge, etc. in the case of State Government Undertakings the aspect of ‘exclusivity’ has to be viewed from the nature of undertaking on which levy is imposed and not on the number of undertakings on which the levy is imposed. The Bench stated,

“If this aspect of exclusivity is viewed from the nature of undertaking, in this particular case, both KSBC and Kerala State Cooperatives Consumers’ Federation Ltd. are undertakings of the State of Kerala, therefore, levy is an exclusive levy on the State Government Undertakings.”

Background

The issue before the Bench was whether the appellant-Kerala State Beverages Manufacturing & Marketing Corporation Ltd., a company engaged in wholesale and retail trade of beverages exempted from levy of gallonage fees, licence fee and shop rental (kist) for FL9 licence and FL1 licence, surcharge on sales tax and turnover tax for the assessment years 2014-2015 and 2015-2016?

The case of the appellant was that the company did not fall within the purview of Section 40(a)(iib), while the case of the revenue was that all the aforesaid amounts were covered under Section 40(a)(iib) as such, such amounts were not deductible for the purpose of computation of income. Section 40 of the Income Tax Act, 1961 is the provision dealing with ‘amounts not deductible’. However, by the Finance Act, 2013 (Act 17 of 2013), Section 40 of the Act was amended by inserting Section 40(a)(iib).

Findings of the High Court

The question of law raised was answered by the High Court of Kerala partly in favour of assessee/appellant and partly in favour of the revenue in the following manner:

“We hold that the levy of Gallonage Fee, Licence Fee and Shop Rental (kist) with respect to the FL9 licences granted to the appellant will clearly fall within the purview of Section 40 (a) (iib) and the amount paid in this regard is liable to be disallowed. The amount of Gallonage Fee, Licence Fee, or Shop Rental (kist) paid with respect to FL1 licences granted in favour of the appellant, with respect to the retail business in foreign liquor, is not an exclusive levy on the appellant, which is a state government undertaking. Therefore the disallowance made with respect to those amounts cannot be sustained. The surcharge on sales tax and turnover tax is not a ‘fee or charge’ coming within the scope of Section 40 (a) (iib) and is not an amount which can be disallowed under the said provision. Therefore the disallowance made in this regard is liable to be set aside. In the result the assessment completed against the appellants with respect to the assessment years 20142015, 20152016 are hereby set aside.”

State Monopoly

During the assessment years 2014-2015 and 2015-2016 the appellant was holding FL9 and FL1 licences to deal in wholesale and retail of Indian Made Foreign Liquor (IMFL) and Foreign Made Foreign Liquor (FMFL) granted by the Excise Department Rules. The appellant was the only licence holder for the relevant years so far as licence to deal in wholesale, and so far as FL1 licences were concerned, it was also granted to one other State owned Undertaking, i.e., Kerala State Cooperatives Consumers’ Federation Ltd.

By interpreting the word ‘exclusively’ as worded in Section 40(a)(iib)(A) of the Act, High Court in the impugned order had held that the levy of gallonage fee, licence fee and shop rental (kist) with respect to FL9 licences granted to the appellant would clearly fall within the purview of Section 40(a)(iib) of the Act and the amounts paid in that regard was liable to be disallowed. At the same with respect to FL1 licences granted in favour of the appellant for retail business, it was held that it was not an exclusive levy; as such disallowance made with respect to the same could not be sustained.

Considering the relevant Memorandum to the Finance Act, 2013 and underlying object for amendment of Income Tax Act, 2013, the Bench opined that the amendment was made to plug the possible diversion or shifting of profits from these undertakings into State’s treasury. Hence, in view of Section 40(a)(iib) of the Act any amount which is  levied exclusively on the State owned undertaking cannot be claimed as a deduction in the books of State owned undertaking, thus same is liable to income tax.

Disagreeing with the view taken by the High Court, the Bench opined that if the amended provision is to be read in the manner interpreted by the High Court, it will literally defeat the very purpose and intention behind the amendment. The Bench stated,

“The aspect of exclusivity under Section 40(a)(iib) is not to be considered with a narrow interpretation, which will defeat the very intention of Legislature, only on the ground that there is yet another player, viz., Kerala State Cooperatives Consumers’ Federation Ltd. which is also granted licence under FL1.”

The Bench added, the aspect of ‘exclusivity’ under Section 40(a)(iib) had to be viewed from the nature of undertaking on which levy is imposed and not on the number of undertakings on which the levy is imposed. Since both the undertakings; i.e. KSBC and Kerala State Cooperatives Consumers’ Federation Ltd. were undertakings of the State, the Bench held that levy was an exclusive levy on the State Government Undertakings.

Fee vis-a-vis Tax

Observing that a clear distinction between ‘fee’ and ‘tax’ was carefully maintained throughout the scheme under Section 40(a) of the Act itself, as wherever the Parliament intended to cover the tax it specifically mentioned as a tax, the Bench stated that Section 40(a)(i) and 40(a)(ia) specifically relate to tax related items. Section 40(a)(ic) refers to a sum paid on account of fringe benefit tax. At the same time, Section 40(a)(iib) refers to royalty, licence fee, service fee, privilege fee or any other fee or charge. Hence,

“If these words are considered to include a tax or surcharge like sales tax, the distinction so carefully spelt out in Section 40 between a tax and a fee will be obliterated and rendered meaningless.”

Further, the Bench observed that gallonage fee, licence fee and shop rental (kist) were the levies under the Kerala Abkari Act on all the licence holders, as such it could not be said that same was an exclusive levy on the appellant/KSBC. Hence, the Bench expressed,

“Once the State Government Undertaking takes licence, the statutory levies referred above are on the Government undertaking because it is granted licences.”

Therefore, the Bench disagreed with the finding of the High Court holding that such finding was contrary to object and intention behind the legislation.

Findings and Conclusion

In the backdrop of above, the Bench concluded:

  1. Gallonage fee, licence fee and shop rental (kist) with respect to FL9 and FL1 licences granted to the appellant would squarely fall within the purview of Section 40(a)(iib).
  2. Surcharge on sales tax and turnover tax, is not a fee or charge coming within the scope of Section 40(a)(iib)(A) or 40(a)(iib)(B), as such same is not an amount which can be disallowed under the said provision and disallowance made in this regard was rightly set aside by the High Court.

Resultantly, assessments completed against the assessee for 2014-2015 and 2015-2016 were set aside and the Assessing Officer was directed to pass revised orders after computing the liability in accordance with the directions in this judgment.

[Kerala State Beverages Manufacturing & Marketing Corporation Ltd. v. CIT, 2022 SCC OnLine SC 3, decided on 03-01-2021]


*Judgment by: Justice R. Subhash Reddy


Appearance by:

For the Appellant: S. Ganesh, Senior Advocate

For the State: N. Venkataraman, Additional Solicitor General


Kamini Sharma, Editorial Assistant has put this report together 


 

Case BriefsSupreme Court

Supreme Court: Dealing with the question as to whether disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 is confined/limited to the amount “payable” and not to the amount “already paid”, the bench of AM Khanwilkar and Dinesh Maheshwari, JJ held that the expression “payable” is descriptive of the payments which attract the liability for deducting tax at source and it has not been used in the provision in question to specify any particular class of default on the basis as to whether payment has been made or not. Stating that the term “payable” has been used in Section 40(a)(ia) of the Act only to indicate the type or nature of the payments by the assessees to the payees referred therein, the Court said that the argument that the expression “payable” be read in contradistinction to the expression “paid”, sans merit and could only be rejected.

Section 40(a)(ia) provides for the consequences of default in the case where tax is deductible at source on any interest, commission, brokerage or fees but had not been so deducted, or had not been paid after deduction (during the previous year or in the subsequent year before expiry of the prescribed time) in the manner that the amount of such interest, commission, brokerage or fees shall not be deducted in computing the income chargeable under “profits and gains of business or profession”.

The Court, further, said that

“Section 40(a)(ia) is not a stand-alone provision but provides one of those additional consequences as indicated in Section 201 of the Act for default by a person in compliance of the requirements of the provisions contained in Part B of Chapter XVII of the Act.”

Explaining the scheme of the Act, the Court said that Section 194C is placed in Chapter XVII of the Act on the subject “Collection and Recovery of Tax”; and specific provisions are made in the Act to ensure that the requirements of Section 194C are met and complied with, while also providing for the consequences of default. Section 200 specifically provides for the duties of the person deducting tax to deposit and submit the statement to that effect. The consequences of failure to deduct or pay the tax are then provided in Section 201 of the Act which puts such defaulting person in the category of “the assessee in default in respect of the tax” apart from other consequences which he or it may incur. Section 40 of the Act, and particularly the provision contained in sub-clause (ia) of clause (a) thereof, indeed provides for one of such consequences.

Hence, holding that when the obligation of Section 194C of the Act is the foundation of the consequence provided by Section 40(a)(ia) of the Act, reference to the former is inevitable in interpretation of the latter, the Court said that the scheme of these provisions makes it clear that the default in compliance of the requirements of the provisions contained in Part B of Chapter XVII of the Act (that carries Sections 194C, 200 and 201) leads, inter alia, to the consequence of Section 40(a)(ia) of the Act. Hence, the contours of Section 40(a)(ia) of the Act could be aptly defined only with reference to the requirements of the provisions contained in Part B of Chapter XVII of the Act, including Sections 194C, 200 and 201.

On the question whether sub-clause (ia) of Section 40(a) of the Act, as inserted by the Finance (No. 2) Act, 2004 with effect from 01.04.2005, is applicable only from the financial year 2005-2006 and not retrospectively, the Court said that

“It needs hardly any detailed discussion that in income tax matters, the law to be applied is that in force in the assessment year in question, unless stated otherwise by express intendment or by necessary implication.”

As per Section 4 of the Act of 1961, the charge of income tax is with reference to any assessment year, at such rate or rates as provided in any central enactment for the purpose, in respect of the total income of the previous year of any person. The expression “previous year” is defined in Section 3 of the Act to mean ‘the financial year immediately preceding the assessment year’; and the expression “assessment year” is defined in clause (9) of Section 2 of the Act to mean ‘the period of twelve months commencing on the 1st day of April every year’. The legislature consciously made the said sub-clause (ia) of Section 40(a) of the Act effective from 01.04.2005, meaning thereby that the same was to be applicable from and for the assessment year 2005-2006; and neither there had been express intendment nor any implication that it would apply only from the financial year 2005-2006.

The Court, hence, said

“We need not multiply on the case law on the subject as the principles aforesaid remain settled and unquestionable.”

 

[Shree Choudhary Transport Company v. Income Tax Officer, 2020 SCC OnLine SC 610 , decided on 29.07.2020]

Case BriefsHigh Courts

Delhi High Court: A Division Bench comprising of Hima Kohli and Pratibha Rani, JJ., listed a writ petition before it for next hearing on 14.03.2018. The petitioner was recruited in the SSB on the post of GD/Ct on 01.02.2006 and while on employ had undergone a surgery for a kidney transplant on 18.03.2015. The present petition was for the issuance of a writ of mandamus for release of a sum of Rs. 11,21,716 which was incurred by him on his surgery and to treat a previous loan of Rs. 6 lakhs extended to him from the SSB, Central Welfare Fund as an amount sanctioned for medical expenses incurred.

The petitioner claimed that from July, 2017 onwards, the respondents had started to deduct Rs. 30,000 from his salary every month in an arbitrary manner. The counsel for the respondents argued that the loan which was given to the petitioner had it’s first installment of Rs. 10,000 due in February, 2015. Further, the counsel argued that the petitioner deposited five installments totaling a sum of Rs. 40,000 between 06.07.2016 to 08.06.2017 before abruptly stopping the installments. Upon a notice being served, the petitioner requested via reply dated 03.08.2017, that monthly installments be deducted from his salary and he be given six months’ time to pay the entire amount and it was under this request that deductions were effected.

The Court asked the respondents to produce rules which permit the respondents to make such hefty deductions for recovery of loan. The Addl. DG, SSB was also directed to file an affidavit explaining the circumstances and rule position which empower the respondents to deduct over 80% of the petitioner’s salary on his defaulting in paying back the loan amount. The said affidavit was directed to be filed within four weeks with a copy to the learned counsel for petitioner. The Court noted that the respondents had not deducted any amount from the petitioner’s salary for the month of January, 2018, further directing the respondents to not deduct any amount till the next date of hearing. [Manish Kumar v. Union of India,  2018 SCC OnLine Del 7218, decided on 06.02.2018]