PF IS APPLICABLE ON BASIC SALARY + ALL ALLOWANCES(SUPREME COURT JUDGMENT)

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THE REGIONAL PROVIDENT FUND
COMMISSIONER, EMPLOYEES’
PROVIDENT FUND ORGANISATION …RESPONDENT(S)
JUDGMENT
-NAVIN SINHA, J.
The appellants with the exception of Civil Appeal No. 6221
of 2011, are establishments covered under the Employees’
Provident Fund and Miscellaneous Provisions Act, 1952
(hereinafter referred to as the “Act”). The appeals raise a
common question of law, if the special allowances paid by an
establishment to its employees would fall within the expression
“basic wages” under Section 2(b)(ii) read with Section 6 of the Act
for computation of deduction towards Provident Fund. The
appeals have therefore been heard together and are being
disposed by a common order.
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2. It is considered appropriate to briefly set out the individual
facts of each appeal for better appreciation.
Civil Appeal No. 6221 of 2011 : The respondent is an
unaided school giving special allowance by way of incentive to
teaching and nonteaching
staff pursuant to an agreement
between the staff and the management. The incentive was
reviewed from time to time upon enhancement of the tuition fees
of the students. The authority under the Act held that the
special allowance was to be included in basic wage for deduction
of provident fund. The Single Judge set aside the order. The
Division Bench initially after examining the salary structure
allowed the appeal on 13.01.2005 holding that the special
allowance was a part of dearness allowance liable to deduction.
The order was recalled on 16.01.2007 at the behest of the
respondent as none had appeared on its behalf. The subsequent
Division Bench dismissed the appeal holding that the special
allowance was not linked to the consumer price index, and
therefore did not fall within the definition of basic wage, thus not
liable to deduction.
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Civil Appeal Nos. 396566
of 2013: The appellant was paying
basic wage + variable dearness allowance(VDA) + house rent
allowance(HRA) + travel allowance + canteen allowance + lunch
incentive. The special allowances not having been included in
basic wage, deduction for provident fund was not made from the
same. The authority under the Act held that only washing
allowance was to be excluded from basic wage. The High Court
partially allowed the writ petition by excluding lunch incentive
from basic wage. A review petition against the same by the
appellant was dismissed.