1955 (3) TMI 44 - HC - Income Tax

Summary

Issues:
1. Whether the sum received by the assessee is liable to be assessed as income under the Indian Income-tax Act, 1922.

Analysis:
The judgment pertains to a reference under section 66(1) of the Indian Income-tax Act, 1922, arising from the Tribunal's order in an Income-tax Appeal. The main issue revolves around determining the tax liability of a sum of &8377; 10,000 received by the assessee. The assessee, a governing director of a company, received this amount from the Provincial Transport Co. Ltd. as part of a modification in remuneration terms. The question is whether this sum constitutes income for the assessee.

The assessee, along with two other individuals, collectively received a monthly remuneration from the managing agents. Following a resolution by the board of directors, the Provincial Transport Co. Ltd. paid a lump sum of &8377; 40,000 to the managing agents, which was then distributed among the three individuals based on their remuneration ratio. The assessee received &8377; 10,000 out of this amount, which has been treated as his income by the taxing authorities. The crux of the matter lies in determining whether this sum can be considered compensation for loss of employment under the Income-tax Act.

The judgment draws comparisons with precedent cases to establish a legal standpoint. It references cases like Godrej and Co. v. Commissioner of Income-tax, Henley v. Murray, Tilley v. Wales, and P.D. Khosla, In re, to differentiate scenarios where payments were considered compensation for loss of employment versus cases where payments were treated as advance remuneration. The court emphasizes that in the current case, the assessee's service was not terminated, and the amount received was a commuted sum reflecting a reduction in remuneration, thus constituting a revenue receipt and taxable income.

In conclusion, the court answers the question in the affirmative, affirming that the sum received by the assessee is liable to be assessed as income under the Income-tax Act. The reference is rejected with costs, and a hearing fee is imposed. The judgment provides a detailed analysis based on legal precedents and the specific circumstances of the case, ultimately clarifying the tax treatment of the amount received by the assessee.