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TMI Blog1965 (11) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... t which were debited outgoings amounting to Rs. 39,370 which included Rs. 20,000 being the loss suffered by the assessee as treasurer of the Patna branch of the Allahabad Bank arising from misappropriation by an assistant cashier. The Income-tax Officer refused to allow the loss suffered in the previous year to be set off against the net profit of Rs. 34,445 and brought that amount of profit to tax as remuneration received by the assessee as treasurer of the Allahabad Bank. The order of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal held that the remuneration received by the assessee as treasurer of the Allahabad Bank was income arising from pursuit of a profession or vocation within the meaning of section 10 of the Act and the loss suffered during the preceding year was liable to be set off against the assessee's income from that source in the year under consideration. At the instance of the Commissioner of Income-tax, U. P., the following questions were referred to the High Court of Allahabad under section 66(1) of the Indian Income-tax Act, 1922 : " (1) Whether on a true interpretation of the deed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Income-tax Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. A decision recorded by the Income-tax Officer who computes the loss in the previous year under section 24(3) that the loss cannot be set off against the income of the subsequent year is not binding on the assessee. The answer to the first question depends upon the true interpretation of the terms of the agreement between the Allahabad Bank and the assessee. If under the terms of the agreement it is found that the assessee was carrying on a business, profession or vocation, the assessee would be entitled to carry forward the loss suffered therein and set it off against the profit in the subsequent year of the same business, profession or vocation under section 24(2). If the remuneration was received by the assessee as a servant of the bank, and on that account has to be computed under section 7 of the Act, the right to set off the loss cannot be claimed under section 24(2). The fact that the assessee held an office is however not decisive of the question whether remuneration earned by him was as a servant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the treasurer for transfer, suspension or dismissal of any member of the cash staff in the bank. (5) The treasurer shall be responsible to the bank for the work and conduct of every person...... to be appointed or employed on his staff and shall make good to the bank any loss or damage sustained or incurred by the bank from any embezzlement, theft, fraud, misappropriation, misconduct, mistake, omission, negligent act or default of any such person or persons. (6) The treasurer shall keep under his care and supervision or that of his staff the moneys, cash, bullion, securities, cheques, notes, hundies, drafts, orders and other documents or property which may from time to time be entrusted to him at the branches, sub-agencies and pay offices ...... and shall whenever so required to do so transmit from one place to another place under such guard as may be provided by the bank all such money, documents or properties and shall be responsible for the care and proper custody of the same while in transit. That the bank shall for the efficient working of its cash department provide proper iron safes and a strong room in each of the said branches, sub-agencies and pay offices and the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember of the Indian staff appointed by him, and to appoint another in the place of the person so dismissed. The staff in the cash department is referred in clauses (5), (6) and (7) as the treasurer's staff. Under clause (4) all the staff originally in the employment of the bank at the date of the agreement and the staff subsequently appointed were to be paid by the bank, but the treasurer was to stand responsible for any loss or damage which may be sustained not only for embezzlement, theft, fraud, misappropriation, misconduct, but even for mistake, omission, negligent act or default of any member of the staff. The treasurer has by the agreement undertaken to keep the moneys, cash, bullion, securities, cheques, notes, hundies, drafts, orders and other documents or property under his care and supervision through his staff, and is liable to protect the property of the bank in his custody, and has to make good any loss occasioned to the bank by the negligence, malfeasance or misfeasance of any of " his servants or agents " even though not belonging to the cash department. The treasurer is responsible for the correctness and genuineness of all hundies, cheques, drafts, securities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treasurer, besides the travelling expenses. But the use of the expressions " serve the bank " and " in the service of the bank " have to be read in the setting of the other covenants. By themselves they are not decisive of the intention of the parties to the agreement. The office of the treasurer can be determined only by notice on either side of a duration of three months, and even on the death of the assessee, the treasurer's obligations accrued or accruing during his lifetime, and future claims in respect of any transactions, even subsequent to his death, remain enforceable. Express reference to liability of the treasurer for future claims for subsequent transactions clearly indicates that the agreement does not come to an end by the death of the assessee : it is determined only by notice of three months' duration. Liability for transactions subsequent to the death of the person for the time being acting as treasurer remaining enforceable, it is reasonable to infer that the right to receive remuneration would enure to the person who would step into the office of the treasurer. The office of treasurer is, therefore, to be held by the assessee, and after his death by hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer or to use the words of Fletcher Moulton L. J. at page 549 in Simmons v. Heath Laundry Company : ' ..... it is impossible to lay down any rule of law distinguishing the one from the other. It is a question of fact to be decided by all the circumstances of the case. The greater the amount of direct control exercised over the person rendering the services by the person contracting for them the stronger the grounds for holding it to be a contract of service, and similarly the greater the degree of independence of such control the greater the probability that the services rendered are of the nature of professional services and that the contract is not one of service '. " Under the contract the treasurer had to procure due performance of the duties of the cash department by employees under his supervision and that he was to be responsible for all acts done by them and to make good the loss which may result from any embezzlement, theft, fraud, misappropriation, mistake, misconduct, omission, negligent act or default of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated to obey all the orders, rules and regulations prescribed by the bank with regard to the discharge of their duties by the cashiers as well as with regard to the amount of balance they were allowed to keep with them. The bank was also given power in case of gross negligence or misconduct or of any fraud, misappropriation or embezzlement by the treasurer or any of the nominees in the discharge of their duties to dispense with the services of the treasurer forthwith. The treasurer was not to engage any person as his assistant or peon about whose character, conduct or reliability, the manager of the board of directors of the bank may have any objection. Shivnandan was a nominee of the treasurer, but from the terms of his employment it appeared that he was working directly under the control and supervision of the Punjab National Bank. This court held that the treasurer's relation to the bank was that of a servant to the master, and the ministerial staff of the cash department appointed by him were also the employees in the cash department. It is difficult to regard the agreement in Shivnandan Sharma's case as even substantially similar to the agreement in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the treasurers and those which are specified in the agreement. It is true that under clause (d) he has to transmit from one place to another place whenever so required, under such guard as may be provided by the bank, all such money, cash, bullion, securities, cheques, notes, hundies, drafts, orders and other documents, but that does not put the treasurer under the general supervision of the bank. On a careful consideration of the covenants, we are of the view that the treasurer was not a servant of the Allahabad Bank under the terms of the agreement dated January 2, 1931, and the remuneration received by him was not " salaries " within the meaning of section 7 of the Income-tax Act. But that is not sufficient to conclude the matter in favour of the assessee. The benefit of section 24(2) of the Indian Income-tax Act may be availed of by the assessee only if the loss sought to be set off was suffered under the head " Profits and gains ... in any business, profession or vocation ". It is difficult to regard the occupation of the treasurer under the agreement as a profession, for a profession involves occupation requiring purely intellectual or manual skill, and the work of the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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