Court dismisses application by CBEU against People’s Bank over deduction of APIT

The High Court of Civil Appeal (Colombo) with Sanjeewa Moraes and Frank Gunawardena presiding, on Tuesday dismissed a leave to appeal application filed by the Ceylon Bank Employees Trade Union against the People’s Bank.

The Trade Union, which comprises employees of state banks, filed action in the District Court

of Colombo in January 2023 seeking a permanent injunction to prevent the People’s Bank from deducting Advance Personal Income Tax (APIT) from salary payments made to employees.

The Trade Union also sought an interim injunction preventing such deduction until the conclusion of the case. The District Court refused the interim injunction, leading to the appeal lodged by the Trade Union.

Similar cases have also been filed by the Trade Union against the Bank of Ceylon, the National Savings Bank, and the Housing Development Finance Corporation.

Whereas, employees were previously required to give their consent to the deduction of APIT from their salaries, the legislative amendment introduced to the Inland Revenue Act in December of 2022 did away with the requirement for consent and made the deduction of APIT mandatory.

A circular issued by the Secretary to the Treasury in January 2023 further clarified that in accordance with the prevailing law, APIT should no longer be an expenditure borne by state[1]owned entities.

The Trade Union argued in court that it had entered into a Collective Agreement with the bank in terms of which the bank was obliged to bear the income tax payable by employees without deducting the same from their salaries.

The Bank’s counter submission was simply that the amending enactment to the Inland Revenue Act introduced in 2022 was lawfully binding on the bank and imposed a supervening illegality that made it impossible for the bank to comply with the Collective Agreement in this regard.

President’s Counsel appearing for the bank further argued that the 2022 amendment to the Inland Revenue Act constitutes the law of the land, and the relief sought by the Trade Union would effectively amount to an order of court directing the bank to contravene the law and potentially open the floodgates for employees of other state-owned entities to make similar applications.

The CBEU was represented in court by Romesh De Silva, President’s Counsel.

Avindra Rodrigo, President’s Counsel, with Sanuri Rajakaruna and Nishika Fonseka appeared for the People’s Bank.