COMMISSIONER OF INCOME TAX Vs. AJIT KUMAR BOSE

JUDGEMENT

(1.) DURING the accounting period relevant to the asst. yr. 1970-71 ending on 31st March, 1970, the employer terminated the services of the assessee by giving him the requisite three months' notice. In addition to the pay and salary for the period of notice, the employer paid to the assessee a sum of Rs. 24,933. The question was whether this amount could be treated as profits in lieu of salary within the meaning of sub-cl. (i) of s. 17 of the IT Act, 1961, ("the Act"). The employer had, by its letter dt. 3rd July, 1969, stated that in view of the closure of the business of the company, the assessee would be paid the requisite three months' salary as well as the amount due on account of his leave and in addition, he would be paid an ex gratia sum of Rs. 24,933 which would be subject to income-tax.

(2.) THE Tribunal has, on a review of the matters on record, found that this amount was received by the assessee as a capital receipt. It has further found that it was really an ex gratia payment; it was compensation within the meaning of s. 17(3) of the Act. THE Tribunal took the view that the word "compensation" denotes an idea that it is paid in lieu of something which the assessee could claim as of right and of which he was being deprived. THE amount in question was an ex gratia payment, i.e., it was paid by the employer voluntarily without being under any obligation to pay it.

(3.) IN this view, it cannot be said that the amount in question was profits in lieu of salary within the meaning of sub-cl. (3) of s. 17 of the Act. It was not taxable as such. The finding of the Tribunal that the amount was a capital receipt or that it was payment of a casual and non-recurring nature as in the circumstances not necessary. We, hence, do not express any opinion on it.