ISHWAR DASS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE facts giving rise to this reference lie in a narrow compass. Ishwar Dass, assessee, has been assessed in the status of an individual. He was appointed as managing director of the Sealand (India) (P) Ltd., by a resolution of the shareholders of the company in January, 1954, for a period of 10 years. In this capacity he was allowed salary of Rs. 350 per month plus certain percentage of profits.

(2.) SUBSEQUENTLY , by a resolution passed in December, 1961, his services as managing director were terminated by the end of December, 1961. Ishwar Dass claimed that thereby he was put to loss as he would have, in the normal circumstances under the original resolution, continued to remain in service up to the month of January, 1964. The board of directors, therefore, considering his submission allowed him a consolidated amount of Rs. 15,200 by way of compensation for the estimated loss due to his premature retirement. He was also allowed an amount of Rs. 6,300 as salary for the period from 1st April, 1960, to the end of December, 1961.

(3.) IN our considered opinion, however, this decision does not come to the avail of the present assessee as we are here interpreting specific provisions contained in S. 17(3) of the 1961 Act. This provision, as already set out above, makes it abundantly clear that any amount of compensation received from an employer, in connection with the termination of employment, has to be treated as profits in lieu of salary and, therefore, assessable as "salary". At the stage of the hearing of this reference, the assessee sought to make reference to the provisions contained in S. 28(ii) (a) of the 1961 Act which are to the following effect :