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Interpretation of whether the transfer of shares to company employees on termination of employment constitutes a payment under the head "Salaries" as per Section 7 of the Income-tax Act. Detailed Analysis: The case involved a resolution passed by a company in 1918 to grant an annual bonus to employees who were members of the Provident Fund. The bonus was to be paid in the form of ordinary shares of the company, becoming the employees' property upon termination of their engagement. The shares were purchased with the bonus amount, and any remaining balance was paid to the employee in cash. The dividends on the shares were to be paid to the employees. The question at hand was whether this transfer of shares to employees upon termination of employment constituted a payment falling under the head "Salaries" as defined in Section 7(1) of the Income-tax Act. It was acknowledged that if the bonus had been paid in cash, it would have fallen under the category of "Salaries" as per the Income-tax Act. However, the issue under consideration was the transfer of shares by the trustees to the employees at the end of their employment. The judges opined that this transfer of shares did not amount to a payment of "salary" within the Act. They reasoned that after the shares were transferred to the trustees for the employees, the company no longer had any legal or beneficial interest in the shares. The company could not compel the trustees to refrain from transferring the shares to the employees, nor could an employee compel the company to transfer the shares, as the company had relinquished any interest in the shares under the scheme. Therefore, the judges concluded that the transfer of shares to employees upon termination of their employment did not constitute a perquisite or profit in addition to their salary paid by or on behalf of the company. The judges unanimously agreed that the answer to the question posed was in the negative, indicating that the transfer of shares in such circumstances did not fall under the "Salaries" category as defined in the Income-tax Act.
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