Unpaid since 2014, taxed on the way out: HMT’s Pinjore workers get their refund claim reopened

One colleague who appealed won an exemption the rest had never claimed. When twenty-one others asked to revise their returns, the Commissioner said they had given no reasons. The High Court has read the file and found otherwise.

HMT Limited was set up in 1953 as a central public sector enterprise to make the machine tools that would build an industrial base for the country. Its Tractor Division opened at Pinjore in Haryana in 1971. By the 1990s performance was declining, and the division became financially unviable. Its employees were not paid salaries from July 2014, and their other statutory dues went unpaid as well.

Many took voluntary retirement. On 23 September 2026 a Bench of Justice Deepak Sibal and Justice Sunish Bindlish decided twenty-one writ petitions brought by former employees about what happened to the tax on those payments.

Two exemptions, and the one nobody claimed

The lead petitioner, an office assistant who had not been paid since July 2014, opted for voluntary retirement. Some colleagues chose retrenchment instead. He received his VRS amount along with a Form-16 issued by HMT, which showed a total of Rs 29,14,500, of which Rs 24,14,500 was treated as taxable after allowing an exemption of Rs 5 lakh under Section 10(10C) of the Income Tax Act, 1961.

Relying on those figures, he filed his return for assessment year 2017-18 in August 2017. It was processed and accepted.

Another employee in the same position, Prempal, took a different route. Having been assessed on the Section 10(10C) footing, he filed a revised return claiming exemption under Section 10(10B) — the provision for retrenchment compensation — instead. The assessing officer refused it. Prempal appealed under Section 246A, and in January 2020 the Commissioner (Appeals), Panchkula allowed his appeal, relying principally on the Madras High Court’s decision in Hindustan Photo Film Workers’ Welfare Centre (CITU) v. Government of India (2018) 400 ITR 299, against which the Revenue’s special leave petition had been dismissed by the Supreme Court.

Other similarly placed employees were less fortunate: through a series of orders in 2022, the Commissioner (Appeals) decided against them, and those orders were carried further.

The petitioners here had never claimed the Section 10(10B) exemption at all. To claim it they needed to file revised returns, and by then the time for that under Section 139(5) had long gone. So they applied to the Principal Commissioner of Income Tax, Panchkula to condone the delay. In January 2022 that application was rejected.

Where the power comes from

The judgment sets out the statutory route to a refund. Under Section 237, a person who satisfies the assessing officer that the tax paid exceeds what he is properly chargeable with is entitled to a refund of the excess. Under Section 239, every refund claim must be made by furnishing a return under Section 139. A revised return under Section 139(5) must be furnished three months before the end of the relevant assessment year or before the assessment is completed, whichever is earlier.

Beyond that, the door is Section 119(2)(b), under which the Board may authorise condonation of delay in filing returns claiming a refund. The governing circular delegates that power by value — Principal Commissioners and Commissioners up to Rs 10 lakh for any one assessment year, Principal Chief Commissioners and Chief Commissioners above that up to Rs 50 lakh, and the Board beyond — bars any application made more than six years after the end of the assessment year, and asks that applications be disposed of within six months of the month of receipt, as far as possible.

“No reasons”, contradicted by the record

The Revenue defended the rejection on several grounds: that the petitioner had voluntarily accepted a large VRS payment, that he was entitled only to the Section 10(10C) exemption, that having filed a return claiming that exemption without protest he could not revise it merely because more vigilant colleagues had obtained favourable orders, and that his application disclosed no reason for the delay.

It is that last point the Bench tested against the file. The petitioner had explained that he came to know of his entitlement only from the later decisions in the cases of similarly situated employees. That is an explanation of why the claim was not made earlier. Whether it is ultimately accepted, the Bench observed, is a separate question — but the Department’s assertion that no reason was given is not borne out by the record.

On that footing the impugned order was held to rest on considerations that were irrelevant or unreasoned, and to have been passed without applying the tests laid down in the governing circular.

Back to the Commissioner

The writ petitions were allowed and the order of January 2022 quashed and set aside. The matter was remitted to the Principal Commissioner to consider the application afresh, after giving the petitioner an opportunity of hearing and considering the material on record.

The Bench expressly declined to say anything on the merits of the claim, which is for the competent authority to decide in accordance with law, and directed that a reasoned order be passed within three months of receipt of the judgment, uninfluenced by any observation in the order it had set aside.