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TMI Blog1958 (10) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... directors of the company and so long as Killicks, Tatas, Khataus and F.E. Dinshaw Limited shall hold not less than 20 shares in the capital of the company they will each respectively be bound to appoint on direction (hereinafter called 'a managing director') of Cement Agencies Limited with liberty from time to time to remove the same and appoint another in his place and they shall also be entitled to appoint another director (hereinafter called a 'nominated director'). Managing and nominated directors shall not be liable to retire by rotation. Each managing director shall be a person well conversant with cement manufacturing business and capable of managing efficiently the business and affairs of the Cement Agencies Limited. clauses 5: Each managing director shall devote the whole of his time and attention to the business of the company and he shall be paid for his services by the party appointing him. In pursuance of clause 4 of that agreement, the assessee represented F.E. Dinshaw Ltd. on the board of directors of Cement Agencies Ltd. and his status was that on one of the four managing directors and as mentioned in that agreement his remuneration was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remuneration at present amounted to nearly ₹ 11,000 a month and it would probably go on increasing every year in the circumstances of the case. I, therefore, claimed compensation of not less than ₹ 3 lakhs, even allowing for the fact of your having secured me a job with Cement Agencies ltd. After discussion at several meetings it has been agreed between you and me that you should pay me the sum of ₹ 1 lakhs as compensation for the termination of my employment. It is to be noticed that in this letter the assessee placed on record the fact that Messrs. F.E. Dinshaw Ltd. has agreed to pay him a sum of ₹ 1 lakhs as compensation for the termination of my employment . On 28th December, 1951, the managing director of Messrs. F.E. Dinshaw ltd. wrote to the assessee acknowledging receipt of the letter of 27th December, 1951, and by that letter the agreement to pay the assessee ₹ 1lakh as compensation for termination of your employment with us was confirmed. Along with the letter a cheque for ₹ 1 lakh was not to the assessee. How, by 1st October, 1951, the Cement Agencies Ltd. had not declared any dividend for that year but that dividend was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was a fairly old man and observed that his services normally could be terminated by F.E. Dinshaw Ltd. by giving a reasonable notice. F.E. Dinshaw Ltd. had already been very liberal inasmuch as they had given him salary for the whole year. Over and above what was paid as remuneration he also got a lakh of rupees. We do not think that the Appellate Assistant Commissioner is right when he says that the nature of the payment is not of the nature of gratuity for past services. F.E. Dinshaw Ltd. were not bound in law to continue with the services of the assessee. If after giving reasonable notice the assessee's services were terminated, he could not have filed a suit for the recovery of damages or for specific performance................. A horse does not becomes a dog if the parties agree to call it such. What weighted with the Tribunal was the circumstance that the assessee was never out of job and his services were immediately taken up by the Cement Agencies Ltd. It also took note of the fact that the assessee continued to do the same job sitting in the same office and the only difference was that F.E. Dinshaw Ltd. and the Cement Agencies Ltd. agreed that the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the substance of the arrangement was different from its form. The doctrine of substance went by the board many years ago and the Privy Council in the well-known can of Chettinad Bank [1940] 8 I.T.R. 522 accepted the principle which was alid down by the House of Lords in England. The court cannot ignore the form of the transaction and say that it will only have regard to the substance of the matter. What is meant is that the legal position cannot be ignored in these matters. It is not meant that a colourable transaction is not to be probed into but that is not meant is that the legal position cannot be ignored in these matters. It is not meant that a colourable transaction is not to be probed into but that is a different matter which would raise different considerations. Here, as we have already mentioned, there is no suggestion and there could be no suggestion that the transaction is a colourable one. This is one of those cases in which the court has to notice the have regard to the forma specific of the two letters. But even a part from this legal aspect of the matter, on merits it is difficult for us to see how it can be said that this payment was not one for compensatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a party with which the employer himself is connected makes little difference. The exemption relating to compensation for loss of employment relates to an employment quoad the same employer and the same employee. The crucial matter is: In whose employment was the assessee and whether that employment was terminated resulting in a loss of employment of the employee? In consider whether there was or was not any loss of employment, the question that the court would have to consider would be: Who is it that was payment the salary to the employee?; who appointed him? and who could have terminated his services?-A different way of putting the same thing, though not in an elegant manner, would be: Who paid the piper?--It is not possible in this context to consider the question of element of the personality of the employer. But says Mr. Joshi, all this makes no different and does not matter. If the employee continued to do the same work, there could be no loss of employment. We are unable to accept this argument. The facts before us are very simply and very clear and the only reasonable inference that can be drawn from those facts is that there was loss of employment though in fact it did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that is that the salary of the assessee was payable to him annually, and the minimum was assured as ₹ 60,000 per annum. That was in 1935 and the termination of the employment was in 1951. It is not necessary for us to express any opinion as to what precise amount f compensation the assessee would have got in a court of law if he had made a claim for damages or compensation for wrongful termination of his employment. That he would have been entitled to a reasonable notice has not been questioned by learned counsel for the Revenue. In such a case, the period of reasonable notice would certainly have been of more than six months. Of that we have no doubt. Therefore, the suggestion in this case that an inordinately larged sum was paid to the assessee by F.E. Dinshaw Ltd. cannot be accepted. Moreover there is not much of a sequitor to this. Ultimately the suggestion of counsel came to be that the arrangement was not what it seemed to be on the face of it. But as we have already observed, it is not for us in this case to question or doubt the geniuses of the arrangement recorded between the parties. There are two questions referred to us and the second question, as Mr. Josh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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