COMMISSIONER OF INCOME TAX Vs. JAMINI MOHAN KAR

JUDGEMENT

(1.) At the instance of the Commissioner of Income-tax, West Bengal-VII, Calcutta, the following question of law has been referred to this court under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1970-71 :

(2.) The facts leading to this reference are stated hereafter. The assessment year involved is 1970-71. The assessee was an employee working in one of the units of Guest Keen William Ltd. This unit was closed and in consequence the services of the assessee were terminated. By letter dated July 3, 1969, the said company informed the assessee that his services would not be required with effect from July 3, 1969, and that pursuant to the standard conditions of service for junior management staff, he would be paid three months' salary in lieu of notice together with salary for the month of July 1969, and salary for the leave accrued to his credit. He was also informed that in addition he would be paid ex gratia a sum of Rs. 35,370 out of which income-tax would be deducted at source. The ex gratia amount received was Rs. 36,326 and exemption from tax was claimed by the assessee in respect thereof on the ground that it was a capital receipt and in view of the decision of the Supreme Court in the case of CIT v. K.K. Roy [1972] 84 1TR 701, it could not be included in the taxable income. The Income-tax Officer, however, held that the amount in question was compensation received in connection with the termination of the employment and was, therefore, assessable as salary in terms of Section 17(3)(i) of the Income-tax Act, 1961.

(3.) Before the Appellate Assistant Commissioner, the assessee reiterated the contentions as raised before the Income-tax Officer and also relied upon the Tribunal's decision in an identical case of Sri Ajit Kr. Bose [1987] 165 ITR90. The Appellate Assistant Commissioner, however, agreed with the Income-tax Officer that the amount in question was assessable as compensation received and, therefore, he declined to interfere.