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TMI Blog2015 (9) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount and the Assessee. The Court accordingly concurs with the concurrent view of the CIT (A) and the ITAT that this was a case where there was no commencement of the employment and that the offer by ACEE to the Assessee was withdrawn even prior to the commencement of such employment. The amount received by the Assessee was a capital receipt and could not be taxed under the head 'profits in lieu of salary'. Other plea of the Revenue that the said amount should be taxed under some other head of income, including 'income from other sources', is also unsustainable. The decision of this Court in Rani Shankar Mishra (2008 (12) TMI 14 - DELHI HIGH COURT) held in similar circumstances that where an amount was received by a prospective employee ‘as compensation for denial of employment,’ such amount was not in the nature of profits in lieu of salary. It was a capital receipt that could not be taxed as income under any other head. - Decided in favour of the Assessee Also the order of the CIT (A), as concurred with by the ITAT, that the Assessee is entitled to the refund of the TDS paid on ₹ 1,95,00,000/- and that the refund of TDS may be adjusted against tax demand if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case the notice period was less than six months, then compensation equivalent to the shortfall of the notice period was payable by the party concerned. 5. The Assessee produced two letters before the AO. The first dated 1st May, 2007 was written by ACEE to the Assessee informing him that there was a sudden change in business plan of the Company vis-a-vis foraying into new financial ventures and that the company is extremely disappointed to convey that it shall not be able to take you on board from 1st July, 2007 as per employment contract. ACEE promised to reconsider the Assessee s services as and when its operation starts . The second letter was dated 15th May 2007 which was the Assessee's response to ACEE that the news was a big financial loss personally since there were many other opportunities available to me . The Assessee stated that since he had opted for ACEE he did not consider other lucrative opportunities available to me . Since it was not clear when ACEE was going to start its new venture, the Assessee proposed that your company must consider something for financial loss incurred by me not available other opportunities. I propose that you must give me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record, came to the conclusion that there was no master and servant relationship between the Appellant and ACEE. No payment had been made by ACEE to the Appellant from the date on which the contract was signed till the date when the offer of employment was withdrawn. The CIT(A) concluded that the payment was made by the prospective employer as compensation towards breach of promise and not for any services rendered or to be rendered. Such payment could not be taxed under Section 17(3)(iii) of the Act. Nor could it be taxed under some other head. The CIT(A) relied on the decision of this Court in Rani Shankar Mishra (supra) to conclude that the said receipt could not be taxed as a business/professional receipt under Section 28 or as a gift under Section 56 of the Act. The CIT(A) concluded that the receipt by the Assessee was bonafide and, accordingly, deleted the addition. The CIT (A) further ordered that the appellant is entitled to refund of TDS paid on ₹ 1,95,00,000/- and accordingly the refund of TDS may be adjusted against tax demand if any arising on appeal effect to this order, and further refund due may be given to appellant. 9. The Revenue s further appeal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue. The Employment Agreement itself mentions that the employment shall commence latest by 1st July, 2007 . Although it further states that the employee shall endeavour to join the company as early as possible , the intention and expectation of the parties was that the employment would commence not earlier than 1st July 2007. This becomes evident from a reading of the letter dated 1st May 2007 written by ACEE to the Assessee in which it stated that that it would not be possible to take the Assessee on board from 1st July, 2007 as per employment contract. That the employment did not commence from the date of the Employment Agreement is further evident from the fact that ACEE stated in its letter dated 25th August 2007 that it was making the payment of ₹ 1.95 crores as a one-time payment to you for non-commencement of employment as proposed. 14. The Court is unable to accept the interpretation sought to be placed on the plain language of Section 17 (3) (iii) of the Act by the Revenue. The words from any person occurring therein have to be read together with the following words in sub-clause (A): before his joining any employment with that person . In othe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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