Britannia takes I-T dept to court

Britannia Industries, the country's top biscuit maker, has taken the income tax department, Kolkata, to court after it received a show-cause notice asking it to explain the withdrawal of funds from the employees' pension fund in 2003.

The notice was issued in June 2007 to the trustees of Britannia Industries Limited Covenanted Staff Pension Fund asking why action should not be taken against the fund as the assessment for 2003-04 reveals a deficit of Rs 12.12 crore (Rs 121.2 million).

The biscuit firm, which is registered in Kolkata, has responded by filing a writ against the department in the Kolkata High Court.

The department's action comes after, the Britannia Industries Pensioners Welfare Association, an association of retired employees of the company, moved the Calcutta High Court on June 11 against Britannia, seeking to restore the withdrawn funds back to the fund.

"The pension cheques of the employees have stopped coming since April 1, 2003, hence this reaction," said Subir Datta, secretary of the association.

Aruna Bhatia, the commissioner of income tax, Kolkata III, said: "This is an official matter and I don't want to comment on it." Britannia executives did not comment on the issue saying the matter is sub-judice.

In their complaint to the income tax department and to the Company Law Board, the pensioners alleged that the trustees of the fund have withdrawn funds that violate the Indian Trust Act, 1882 and the Supreme Court guidelines on pension fund withdrawal. The company's trustees have also not taken any prior approval from the income tax department to withdraw funds, the pensioners said.

This is not the first time the controversial withdrawal of funds from Britannia's pensioners' kitty in 2004 has reached the courts. Earlier, four members of the association moved the Madras High Court against the non-payment of pension to them, including illegal withdrawal.

The pensioners argue that, according to the Supreme Court ruling, the pension is a deferred salary and not an ex-gratia payment (that is, a payment made as a favour rather than an obligation).

Quoting the Supreme Court judgement, the pensioners said the pension does not depend on the pension fund but was a liability taken up by the company.

Datta says Britannia has not only stopped the payment of pensions to its former employees but has also stopped the tri-annual pension increase to the pensioners with effect from April 1, 2004.

This, the pensioners say, violates the terms of service conditions and the salary revision letters, dated April 1, 1992, sent to all managers and officers as approved by the board.

The pensioners have also filed a complaint against C C Choksi, the chartered accountants of the pension fund that advised the trustees to withdraw the funds, with the Institute of Chartered Accountants of India.