(1.) BY an agreement dt. the 15th of Oct., 1949, the assessee was appointed general manager of the Orissa Textile Mills Ltd. BY that agreement, the appointment of the assessee was to be in force for a period of five years in the first instance with option of renewal for a further period of two years. The assessee was to be paid a monthly remuneration of Rs. 2,100 and a monthly allowance of Rs. 900 for entertainments, maintenance of car etc. Besides this remuneration he was to be paid commission at 3per cent on the net profit of the company and was to be provided with a furnished bungalow, four servants, free use of the company's transport and separate allowance for entertainment on behalf of the company and free medical aid. The assessee undertook to manage the affairs of the mills efficiently and on a profit earning basis and if he "failed to establish the mills on a sound basis within 12 months from the date " of his joining, i.e., 1st April, 1950, the company reserved its rights to terminate his services by giving him six months' notice in writing on the 1st of April, 1951, stating the various grounds of inefficiency. It was further provided that neither party could terminate the contract except on account of continued illness or permanent incapacity (of the assessee). It was also provided that in the event of any one of the parties terminating the contract except for reasons "stated before", the party terminating the contract will be responsible to pay to the other the balance of the monthly remuneration for the unexpired period of the contract as provided for in condition 7 of the letter of appointment. This last condition is somewhat obscure, because there could evidently be no monthly remuneration being paid by the assessee to the company in the event of the assessee putting an end to the contract. In the context in which the condition is found, it must mean that in the event of the contract being terminated by the company for reasons other than those set out earlier, the company will pay to the assessee the balance of the monthly remuneration for the unexpired period of the contract. On the 2nd of July, 1951, the company served a notice upon the assessee terminating his appointment as the general manager of the company with immediate effect and three reasons were given in that notice : (1) that for some time past the assessee had been inciting the labour of the mills against the company ; (2) that the assessee had been acting in a manner prejudicial to the interest of the company and (3) tht the assessee had failed to manage the affairs of the mill either efficiently or on a profit earning basis and had also failed to establish the mills on a sound basis within 12 months from 1st April. 1950. Eight particulars of the charges against the assessee were then set out in that notice. It is unnecessary to consider these particulars in detail in the view we take on this reference. It may be sufficient to observe that some of the particulars relate to the the first reason, some others to the second reason and two more to the third reason. Thereafter, the assessee served a notice upon the company demanding payment of Rs. 2,70,750, for termination of his employment. Negotiations were then held and on the 17th of July, 1951, it was agreed between the company and the assessee that the services of the assessee as the general manager were to be deemed to be terminated w.e.f. the 2nd of July, 1951, and that the company shall pay to the assessee a sum of Rs. 1 lakh in full settlement of all his claims for compensation for termination of the agreement in the instalments specified. Besides this payment of Rs. 1 lakh certain amounts to which the assessee was entitled under the terms of the agreement were also agreed to be paid to him. It was then provided that the assessee had no claim whatsoever against the company either under the agreement dt. the 15th of Oct., 1949, or arising out of the same or otherwise howsoever on any account whatsoever and the assessee agreed that he will not for a period of one year from the date of the agrument enagage him silf in any profession or business either in his own account or in the services of others within 100 miles of Chowdwar which may be detrimental to the interest of the company. It was finally agreed that the company withdrew all the allegations against the assessee and the assessee withdrew all the allegations against the company, its managing agents and directors. The ITO brought the amount of Rs. 1 lakh to tax on the view that its was not received solely as compensation for loss of employment. In appeal to the AAC, the order made by the ITO was reversed. In appeal to the Tribunal, it was held that the termination of employment of the assessee was made in exercise of the powers vested in the company under cl. 11 of the agreement dt. the 15th of Oct., 1949, and that the amount of Rs. 1 lakh paid to the assessee was "under" this agreement and not "for" it. They further expressed the opinion that the assessee had received from the employer a certain sum of money which "went to fill the hole created in his `salary' income by reason of premature termination of service contract, such premature termination of contract with consequent damages payable on account of it being provided by the agreement of service itself." On the view taken by the Tribunal, the appear filed by the CIT was allowed. The Tribunal has referred to this Court the following question :