COMMISSIONER OF INCOME-TAX Vs. RPANCHAPAKESA AYYAR

JUDGEMENT

(1.) Two questions are referred to us by the Commissioner of Income-tax: (1) Whether the sum of Rs. 8,256 paid to the assessee by the Government of Madras on 12 March 1930, is income liable to tax? and (2) Whether the said sum is exempt from tax under Clause (5) or Clause (7), Sub-section 3, Section 4 of the Act?

(2.) The facts are as follows: The assessee was an Assistant Engineer in Government service. In 1923 he with other Assistant Engineers was compulsorily retired. His retiring age was 55 and he would have reached that age in 1927. He was thus compulsorily retired from service four years before he should have been. He and the others similarly compulsorily retired presented memorials to the Government of India and the Secretary of State for India setting forth their grievances and this resulted in the issue of the following order by the latter which was published by the Government of Madras on 8 March 1930, viz., that the assessee should receive as compensation; (1) a lump sum equivalent to two-thirds of the difference between the amount received by him in pension from the date on which he was discharged to the date of attaining 55 years of age and the amount he would have received in pay had he been retained in service up to that age and (2) with effect from his 55 birthday the pension which he would have received had he remained in service up to that day. In 1930 the income-tax authorities desired to assess the sum of Rs. 8,256 received by the assessee under head (1) of the before mentioned order to income-tax and the Commissioner of Income-tax to whom the matter was referred by the Income-tax Officer has made this reference to us.

(3.) It is contended here on the assessee's behalf that the payment of the amount was not one made in respect of any service rendered by the assessee and did not arise out of any business conducted by him or profession carried on by him or from any service performed for Government, and so does not fall under any of the heads of income to be taxed, and furthermore that, even if it does, it is exempt from income-tax Under Section 4(3), (5) or (7). With regard to the first point, our attention was directed to a number of English decisions, but I do not consider them helpful in a consideration of it. As has been pointed out before both by this Court and by the other High Courts in India, the English taxing statute differs in important respects from the Indian as regards the chargeability of income to income-tax. To put it shortly, the distinction between the English taxing statute and the Indian, it seems to me, is that under the former, no income, profits or gains is taxable that is not included in the taxing statute, whereas under the latter Act, every profit, income or gain is taxable that is not excluded. On an examination of two sections of the Indian Income-tax Act., this is made clear. Section 4(1) says: Save as hereinafter provided, this Act shall apply to all income, profits or gains, as described or comprised in Section 6, from whatever source derived, accruing or arising or received in British India, or deemed under the provisions of this Act to accrue, or arise, or to be received in British India.