COMMISSIONER OF INCOME TAX Vs. S P JAIN

JUDGEMENT

(1.) IN pursuance of the order made by the Supreme Court in Civil Appeals Nos. 457 and 458 of 1960, dated 4th May, 1961, the Income -tax Appellate Tribunal has stated this case, referring to us the following question of law : 'Whether on the facts and circumstances of the case, the sum of Rs. 7 lakhs is liable to tax under section 7 of the Indian Income -tax Act ?'

(2.) THE assessee before us is an individual. We are here concerned with the assessment year 1950 -51, the corresponding accounting period being the year ended on 31st March, 1950. The assessee was an employee of Dalami Cement and Paper Marketing Co. Ltd. (hereinafter referred to as the company). The assessee joined the service on 1st April, 1943, and the terms and conditions of his appointment have later been incorporated in a letter of 11th October, 1953 (annexure 'A' to the statement of the case). We would be adverting to this letter later. Suffice it to state at this stage that the assessee was to look after the Bombay office organisation of the company and was to get therefor a fixed amount of Rs. 4,000 per month. The company had also further agreed to pay to the assessee income -tax and super -tax due and payable on the said amount of remuneration per month, according to the rate prescribed in the yearly Finance Acts. The assessee was also further entitled to get from the company conveyance and entertainment allowances as agreed between them from time to time. The period of employment was for a definite period of 25 years commencing from 1st April, 1943, the company reserving its right to depute the assessee to look after the interest of any other of its concern. It was further provided in the letter that in the event of his services being terminated before the expiry of the period of 25 years, the assessee would be entitled to compensation calculated as equivalent to Rs. 40,000 for each unexpired year of the duration of the assessee's employment. It is principally this clause relating to compensation that has to be considered in this case in recording our answer to the question referred to us.

(3.) THE letter further informed the assessee that a duplicate copy of the letter was sent to him and on his returning the duplicate copy duly signed he would be paid the said sum of Rs. 7 lakhs. In due course, the said amount of Rs. 7 lakhs was paid by the company to the assessee.