LexALL INDIA REPORTER LTD., NAGPUR versus RAMACHANDRA DHONDO DATAR
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- - 2 S.C.R. SUPREME COURT REPORTS 773 ALL INDIA REPORTER LTD., NAGPUR v. RAMACHANDRA DHONDO DATAR (J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, JJ.) Income Tax-Decree for compensation for wrongful termination of service-Arrears of salary, interest and costs, if amount to salary-- Power of employer to deduct income-tax from salary-Indian Income Tax Act, 1922 (II of 1922), ss. 18(2), 46(5). In a civil suit the respondent obtained a decree against his employer the appellant company for a sum which included com- pensation for wrongful termination of bis service, arrears of salary, interest and costs of the suit, and then applied for execu- tion of the decree. The Income-tax Officer served a notice upon the respondent under s. 46 of the Indian Income-tax Act and applied to the District Judge that the appeJlant be permitted to deduct at source the income-tax, surcharge and super tax on the sum awarded to the respondent and pay the same in the Govern- ment Treasury. The appellant-company also moved Ute execut- ing court for a declaration that they were entitled and bound to deduct the tax due on the amount. The District Judge directed the appeJJant company to pay the income-tax and super-tax to the Income Tax Department and pay the balance in Court toge- ther with a receipt for the income tax paid. In appeal the High Court reversed the order of the District Judge and directed the execution of the decree as claimed by the respondent. On appeal by the appeJJant company, Held, that as no tax was assessed against the respondent the Income Tax Officer could not issue i. notice under s. 46(5) requiring the appellant company to deduct tax from the decretal amount. · A substantial part of the decn;tal amount did not represent "salary" of the respondent: it consisted of compensation for wronglul termination of the respondent's service, salary in lieu of six months' notice, interest and costs of the suit. It was a judgment-debt and rio provision for payment of income. tax was made in the decree which was liable to be executed as prayed by the respondent. The appellant company was not therefore entitled ·or bOund to deduct income tax under s. 18 sub-s. (2) of the Act. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 327of1959. Appeal from the order dated June 28, 1956, of the Bombay High Court at Nagpur in Misc. First Appeal No. 15 of 1954. . · 98 I960 November a9. 774 SUPREME COURT REPORTS (1961] i96o A. V. Viswanatha Sastri, Shankar Anand and A.G. All India Repor- Ratnaparkhi, for the appellant. ter Ltd., Nagpur K. N. Rajagopal Sastri, as amicus curiae. Ramac:~ndra 1960. November 29. The Judgment of the Court Dhondo Datar was delivered by Shah J. SHAH, J.-Ramachandra Dhondo Datar-herein- after referred to as the respondent--was employed by the appellant company in its publicat'ons branch. By agreement dated March 23, 1943, the appellant company agreed to pay to the resp::mdent as from April 1, 1943, remuneration per an'J.um equal to 3!% of the gross sales or Rs. 12,000 whichever was greater. The agreement was to remain in opera- tion for ten years from April 1, 1943, in the first in- stance and was renewable at the option of the respondent for such period as he desired. By notice dated April 19, 1948, served on the respondent on April 22, 1948, the appellant coinpany terminated the employment of the respondent. The respondent then filed a civil suit in the court of the Fifth Additio- nal District Judge, Nagpur, for a decree for Rs. 1,30,000 being the amount of compensation for wrong- ful termination of employment, arrears of salary and interest. On July 17, 1953, the court after giving credit for the amount received by the respondent passed a decree for Rs. 42,359 (which was inclusive of Rs. 36,000 as compensation for tel'mination of em- ployment and Rs. 6,000 as salary in lieu of six months' notice and interest) and costs and interest on judgment. The respondent then applied for execution of the decree and claimed Rs. 54,893-12-0 less Rs. 18,501-10-0 decreed against him in a cross suit filed by the appellant company. The Income Tax Officer, Nagpur, served a notice under s. 46 of the Indian Income Tax Act up:>n the respondent and also gave intimation to the District Judge, Nagpur, that the appellant company be permitted to deduct at source and to pay into the Government Treasury Rs. 15,956- 13-0 as income-tax, surcharge and super-tax due on the sum o
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