Supreme Court Hears Appeals on Inclusion of Special Allowances in Basic Wages for Provident Fund. The court considered whether special allowances paid by establishments to employees fall within 'basic wages' under Section 2(b)(ii) read with Section 6 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.

Civil appeals and transfer case arising from orders of High Courts regarding inclusion of special allowances in basic wages for provident fund deductions under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.

The establishments sought to exclude certain allowances from the definition of basic wages for provident fund contributions, while the Regional Provident Fund Commissioner sought inclusion.

Dispute over whether special allowances paid to employees constitute 'basic wages' under Section 2(b)(ii) read with Section 6 of the Act for computation of provident fund deductions.

In Civil Appeal No. 6221 of 2011, the Single Judge set aside the authority's order, but the Division Bench initially allowed the appeal, then recalled the order, and later dismissed the appeal. In other appeals, the High Courts partially allowed or dismissed writ petitions, and review petitions were dismissed.

Whether special allowances paid by an establishment to its employees fall within the expression 'basic wages' under Section 2(b)(ii) read with Section 6 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 for computation of deduction towards Provident Fund.

The Regional Provident Fund Commissioner argued that special allowance was camouflaged dearness allowance, paid to all employees on account of rise in cost of living, and thus liable for deduction as part of basic wage. The establishments argued that basic wages exclude allowances not payable by all concerns or not earned by all employees, and that allowances like house rent allowance, conveyance allowance, and incentive wages are not universally paid and thus excluded.

The ratio decidendi is that for the purpose of provident fund deductions under Section 6 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, 'basic wages' under Section 2(b) includes all emoluments earned in accordance with the terms of employment, but excludes certain allowances. However, dearness allowance, though excluded from basic wages, is included for contribution under Section 6. Allowances that are universally and necessarily paid to all employees are part of basic wages, while allowances not payable by all concerns or not earned by all employees, or linked to extra output, are excluded.

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. Relying on Bridge and Roof Co. (India) Ltd. vs. Union of India, (1963) 3 SCR 978, it was submitted that whatever is payable by all concerns or earned by all permanent employees had to be included in basic wage for the purpose of deduction under Section 6 of the Act.

The appeals arise from orders of various High Courts. In Civil Appeal No. 6221 of 2011, the authority under the Act held that special allowance was to be included in basic wage; the Single Judge set aside the order; the Division Bench initially allowed the appeal, then recalled the order, and later dismissed the appeal. In other appeals, the authorities held that allowances were part of basic wage; the High Courts partially allowed or dismissed writ petitions; review petitions were dismissed. Transfer Case (C) No.19 of 2019 arises from a writ petition against a show cause notice, which was dismissed, and the writ appeal was transferred to the Supreme Court.

• Employees' Provident Funds and Miscellaneous Provisions Act, 1952: Section 2(b), Section 2(b)(ii), Section 6