1961 (5) TMI 3 - SC - Income Tax

Summary

Issues:
1. Refusal to call upon the Income-tax Appellate Tribunal to state a case under section 66(2) of the Indian Income-tax Act.
2. Taxability of the sum of Rs. 7 lakhs under section 7 of the Indian Income-tax Act.

Analysis:
The judgment pertains to two appeals related to income-tax proceedings. Civil Appeal No. 457 of 1960 challenges the High Court's order refusing to direct the Income-tax Appellate Tribunal to state a case under section 66(2) of the Indian Income-tax Act. Civil Appeal No. 458 of 1960 concerns the Income-tax Appellate Tribunal's order deciding an appeal under section 33(4) against the department. The respondent, an employee of a company, received Rs. 7 lakhs as compensation for the cessation of employment. The income-tax authorities sought to tax this amount under section 7 of the Indian Income-tax Act. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal held that the payment was not in lieu of past services, leading to a dispute on the taxability of the sum.

The respondent argued that the payment of Rs. 7 lakhs was not taxable as compensation for past services, as contended by the department. The determination of the nature of the payment required an analysis of the terms of the employment agreement, the termination letter, and the agreement for the payment. The court held that this determination was a question of law, not fact. Consequently, the High Court erred in refusing to call for a statement of the case from the Tribunal. The court directed the Tribunal to state the question of law: "Whether, on the facts and circumstances of the case, the sum of Rs. 7 lakhs is liable to tax under section 7 of the Indian Income-tax Act."

Civil Appeal No. 458 of 1960, related to the Income-tax Appellate Tribunal's order, was dismissed as it was not pressed before the court. Civil Appeal No. 457 of 1960 was allowed, and the High Court's order was substituted with a direction to call for a statement of the case. The costs of the appeal were to be considered in the reference to the High Court.