TALWAR V D Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case the assessee was employed as the general manager of Messrs. J. K. Iron and Steel Co. Ltd., Kanpur. The terms of his employment as agreed upon by the assessee and the company of his employment as agreed upon by the assess and the company were incorporated in his appointment letter dated February 7, 1946. A formal agreement was also executed between the parties on February 9, 1946. The assessee actually joined the service of the company on May 1, 1946. According to the service agreement, the pay of the assessee was fixed at Rs. 2,000 per month with certain allowances and amenities, like residential accommodation, etc. According to the agreement, the period of service was to be for five years. Clauses 5 and 6 of the appointment letter were in the following terms :

(2.) CLAUSE 21 of the memorandum of agreement dated February 9, 1946, reads as follows :

(3.) IN my opinion, the principle of these authorities apples to the present case. It follows, therefore, that the amount of Rs. 25,200 paid to the assessee was part of the remuneration which the assessee was entitled to get under the contract of service. The amount paid to the assessee cannot, therefore, be treated as compensation for loss of employment within the meaning of Explanation 2 of section 7. The section as it stood prior to the amendment of 1955 reads as follows :