1984 (5) TMI 65 - AT - Income Tax

Summary

Issues:
1. Whether the payment received by the assessee from the UK Co. is exempt under section 10(10A) of the Income-tax Act, 1961.
2. Whether the assessee was an employee of the UK Co. or an independent broker.
3. Whether the payment received by the assessee was commuted pension or additional professional fees.

Detailed Analysis:
1. The assessee claimed the first instalment of Rs. 62,500 as exempt under section 10(10A) for the assessment year 1978-79. The Income Tax Officer (ITO) observed that the amount was not eligible for exemption under section 10(10A) as the relationship between the assessee and the foreign employer was not that of an employer-employee. The assessee alternatively argued that the payment was a capital receipt and not taxable, which the ITO rejected. The Commissioner (Appeals) later ruled in favor of the assessee, stating that the payment was a commutation of pension and thus exempt under section 10(10A).

2. The revenue appealed the Commissioner's decision, arguing that the relationship between the UK Co. and the assessee was not that of an employer-employee. They contended that the assessee was carrying on a business of brokerage on behalf of the UK Co. The revenue highlighted that the UK Co. did not deduct tax from the payments, indicating a business relationship rather than an employment one. The assessee's counsel countered by emphasizing the terms of employment, stating that the assessee was expected to conduct business for the UK Co. and that the designation of "broker" described the nature of his work.

3. The Tribunal analyzed the facts and arguments presented by both sides. It noted that the initial appointment letter described the assessee as a passenger broker for the UK Co., with remuneration based on passengers booked. The payment in question was a lump sum offered as a commutation of pension. The Tribunal agreed with the Commissioner (Appeals) that the assessee was an employee of the UK Co. and that the payment constituted commuted pension, exempt under section 10(10A). The Tribunal dismissed the revenue's appeal and the assessee's cross-objection, affirming the Commissioner's decision.

In conclusion, the Tribunal upheld that the payment received by the assessee was exempt under section 10(10A) as a commutation of pension, considering the nature of the relationship between the assessee and the UK Co. as that of an employer-employee. The judgment emphasized the terms of employment and the correspondence between the parties to determine the nature of the payment and the assessee's status.