The Madhya Pradesh High Court in the case of Montage Enterprises Pvt. Ltd (‘Petitioner’) vs. Employees’ Provident Fund has held that certain allowances like conveyance allowance, transportation allowance and special allowance should be treated as part of Basic wages under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (‘EPF Act’). Accordingly, provident fund (‘PF’) contributions should be remitted on such allowances.
Presently most of the organisation is not considering other allowances for calculation of P.F. liability. Can some one suggest what is the further action based on above jujment..
From India, Pune
Presently most of the organisation is not considering other allowances for calculation of P.F. liability. Can some one suggest what is the further action based on above jujment..
From India, Pune
P.F. is only calculate on Basic Salary (Basic pay + D.A.) nothing else. Decision may vary case to case.. but basic formula for P.F. is only calculate on Basic pay + D.A. Regards, Jigar
From India, Ahmadabad
From India, Ahmadabad
162
Case Details as follows:
The Employees’ Provident Fund Organisation (‘EPFO’) has in a recent internal communication1
forwarded the aforesaid judgment to its officers and directed them to utilise this judgement as per the merits of the case.
Facts of the case
• The petitioner has two categories of employees namely Non – Executive and Executive whose salary includes the following components:
Category
Components
Non Executive
• Basic Salary
• Variable Dearness Allowance (‘VDA’)
• Conveyance Allowance
Executive
• Basic Salary
• House Rent Allowance
• Special Allowance
• The petitioner was remitting PF contributions for Non - Executive employees on two components of salary namely Basic Salary and VDA and for Executive employees on Basic Salary.
The PF office contended that the company was paying basic wages to its employees in guise of various allowances to avoid the PF liability and thus issued summon to the petitioner for determination of the PF dues.
• In its assessment order, the PF office held that both conveyance allowance and special allowance are part of basic wages and have to be considered while remitting PF liability.
• Against the assessment order, the petitioner filed an appeal before the Employees’ Provident Fund Appellate Tribunal which was dismissed by the appellate authority.
• Aggrieved by the above dismissal, the petitioner filed a petition before the Madhya Pradesh High Court.
PF department’s contention
• PF department contended that basic wages includes all emoluments earned by the employees under all circumstances. The department placed reliance on the ruling of the honourable Supreme Court in the case of M/s Bridge and Roofs Co. Ltd. vs. Union of India and others2 wherein the principle of universality3
was laid down to determine whether the PF contribution was payable on a particular component of salary.
Petitioner’s contention
• The petitioner contended that the company is not liable to deduct provident fund from the wages of the employees except on basic wages and VDA and the petitioner placed reliance on the ruling of the honourable Supreme Court in the case of Manipal Academy of Higher Education vs. Provident Fund Commissioner4
.
Madhya Pradesh High Court ruling
• Based on the facts of the case, and the principle of law laid down in the case of Manipal Academy (Supra), the high court held that since there was no criteria to decide the special allowance and the fact that both the conveyance and special allowance was universally, necessarily and ordinarily paid to all the employees across the board, both the above allowances would have to be considered while determining the PF liability.
2 AIR 1963 SC 1474
3 Under the principle of ‘universality’ what is payable universally, necessarily and ordinarily in all concerns and is earned by all the permanent employees is included for the purpose of PF contribution.
4 (2008) 5 SCC 428
From India, Pune
The Employees’ Provident Fund Organisation (‘EPFO’) has in a recent internal communication1
forwarded the aforesaid judgment to its officers and directed them to utilise this judgement as per the merits of the case.
Facts of the case
• The petitioner has two categories of employees namely Non – Executive and Executive whose salary includes the following components:
Category
Components
Non Executive
• Basic Salary
• Variable Dearness Allowance (‘VDA’)
• Conveyance Allowance
Executive
• Basic Salary
• House Rent Allowance
• Special Allowance
• The petitioner was remitting PF contributions for Non - Executive employees on two components of salary namely Basic Salary and VDA and for Executive employees on Basic Salary.
The PF office contended that the company was paying basic wages to its employees in guise of various allowances to avoid the PF liability and thus issued summon to the petitioner for determination of the PF dues.
• In its assessment order, the PF office held that both conveyance allowance and special allowance are part of basic wages and have to be considered while remitting PF liability.
• Against the assessment order, the petitioner filed an appeal before the Employees’ Provident Fund Appellate Tribunal which was dismissed by the appellate authority.
• Aggrieved by the above dismissal, the petitioner filed a petition before the Madhya Pradesh High Court.
PF department’s contention
• PF department contended that basic wages includes all emoluments earned by the employees under all circumstances. The department placed reliance on the ruling of the honourable Supreme Court in the case of M/s Bridge and Roofs Co. Ltd. vs. Union of India and others2 wherein the principle of universality3
was laid down to determine whether the PF contribution was payable on a particular component of salary.
Petitioner’s contention
• The petitioner contended that the company is not liable to deduct provident fund from the wages of the employees except on basic wages and VDA and the petitioner placed reliance on the ruling of the honourable Supreme Court in the case of Manipal Academy of Higher Education vs. Provident Fund Commissioner4
.
Madhya Pradesh High Court ruling
• Based on the facts of the case, and the principle of law laid down in the case of Manipal Academy (Supra), the high court held that since there was no criteria to decide the special allowance and the fact that both the conveyance and special allowance was universally, necessarily and ordinarily paid to all the employees across the board, both the above allowances would have to be considered while determining the PF liability.
2 AIR 1963 SC 1474
3 Under the principle of ‘universality’ what is payable universally, necessarily and ordinarily in all concerns and is earned by all the permanent employees is included for the purpose of PF contribution.
4 (2008) 5 SCC 428
From India, Pune
What should be done from the perspective of provisioning in the books of accounts. one state's pf commissioner issues a demand notice on a formula and another state issues demand on another formula. the auditor says that we should incorporate this as notes to accounts in the annual report. if we incorporate this in notes to accounts, there may be further exposure and other regional pf comissioners may raise issues.
Unable to comprehend solution. we have taken a legal opinion mentioning that no provision needs to be made in books and that there should be status quo. now auditors are forcing us to incorporate this in notes.
any views?
From India, Bangalore
Unable to comprehend solution. we have taken a legal opinion mentioning that no provision needs to be made in books and that there should be status quo. now auditors are forcing us to incorporate this in notes.
any views?
From India, Bangalore
Dear All,
Please refer my fresh discussion (Thread) on "Labour Law up-date" posted today in which clipping of Labour Law Reporter is attached.
Thanks and regards.
Keshav Korgaonkar
Shantadurgaent.com,Insurance Advisors,Corporate Advisors,Legal Advise,Wage and salary,Shantadurgaent.com,Labour Compliance Audit,SSI registration,NOC from
From India, Mumbai
Please refer my fresh discussion (Thread) on "Labour Law up-date" posted today in which clipping of Labour Law Reporter is attached.
Thanks and regards.
Keshav Korgaonkar
Shantadurgaent.com,Insurance Advisors,Corporate Advisors,Legal Advise,Wage and salary,Shantadurgaent.com,Labour Compliance Audit,SSI registration,NOC from
From India, Mumbai
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1 Guidlines On PF to be charged on all other allowances 05032019.pdf