LexV. D. TALWAR (DEAD) AND AFTER HIM HIS HEIRS versus THE COMMISSIONER OF INCOME- TAX, BIHAR
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... 2 S.d.R .. SUPRENIE COURT R£PORTS 519 V. D. TALWAR (DEAD) AND AFTER HIM HIS HEIRS v. THE COMMISSIONER OF INCOME- TAX, BIHAR ' (S. K. DAS, A. K. SARKAR arid M. HIDAYATULLAH, JJ.) lncome-Tax-A&8esament-Aa1e.t3ee's ser?Jices terminated in term• of contract-Payment of one year'• •alary in lieu of notiu-Amount received by a8'e8See, if compensation for ws.e of employment-Indian Income-tax Act, 1922 (11 of 1922) s. 7. The assessee, Mr. V. D. Talwar, was employed as General Manager by a company. According. to the service agreement, he was to get Rs. 2,000/- per month as his salary with an incre- ment of Rs. 100/- every year. Deductions for income-tax, absence of duty etc. could be made from his salary. The agree~ent of service was for five years, but the same could be terminated earlier by the employer after giving a notice of 12 months or payment of salary in lieu thereof. The assessee joined as General Manager on May 1, 1946 and his services were terminated with effect from August 31, 1947. The services were not terminated for any default or misconduct on the part of the assessee but were terminated because the company did not want to continue the assessee in their employment. No notice ·of 12 months was given by the company as required by the contract. The company actually paid Rs. 18,096/l/- which was the amount due as salary for twelve months after deduction of Income .. tax at the source. The Income-tax Officer held that the sum of Rs. 25,200/- was·a revenue receipt of the assessee lial)le to be taxed under tl1e Indian Income-tax Act and he rejected the claim of the assessce that the said sum was co1npensation for l(}ss of employ- ment and the tax amounting to Rs. 7,!03/15/- should be re- funded to him. The appeal of the a.sessee was accepted by the Appellate Assistant Commissioner but his decision wa• reversed by the Income-tax Appellate Tribunal. The question of law referred by the Tribunal to the High Court was whether the surh of Rs. 25,200/ .. was revenue incoiue of the assessce or not. The liigh Court gave the decision a~ainst the assessee who r.afne to this Court by special leave. - 1963 Mareh 26 1963 Y.D. Talu..u v. Cmnmissi0111r of lncom1t·ox, Bihar 520 SUPREME qotJR't REl>OR'tS t19M] vot. Held that what was paid to the a.sessee was hi> salary in lieu of notiee and not compensation for loss of employment. The asscsscc \vas not given any notice for the termination of his services. What he was given was his salary for 12 months. He Rot exactly what he was entitled to get under the terms of his employment. He was not deprived of any rights under his service contract. The payment made to him could not be called compensation for lo&• of office and he was liable to be taxed under s. 7 of the Act. Henry (II. M. ln,,pector of Tax"6) v. Arthur Fa.ter and lltnry (ll. 111. lnsptclor of TaxM) v .. la.eph FtM/er (1932) 16 T. C. 605, Tlte Commissioner of Income-tax, Bombay - City I, llomba!I v. B. D. Sheppard, Bombay. (1964] I S. C. R. 163, Henley v. Murray (H. M. lmptelar of Taus) (1950) 31 T. C. 351, Dale (JI. M. lnsper,torofTaX«) v. de Soi.Mon.•, (1950), 32 T. C. 118, and DuJJ(H. M. Inspector of Taxes) v. Harlow, (1941) 23 T. C. 633, referred to. C1nL APPELLA'fil JuttISDICTION : Civil Appeal No. ()73 of 1962. Appeal by special leave from the judgment and decree d;1ted November 22, l!)()O, of the Patna High Court in Misc. .Judicial Case No. 740 of 1958. A. V. Viswanatha Sastri and .lf. 8. Nara8im- han, for the appellants. Gopal Singh and R. .V. Sachthey, for the respondent. J 963. March 26. The Judgment of the Court was delivered by Das 1. S. K. DAB J.-V. D. Talwar, who was assosee before the taxing authorities and whose legal repre- sentatives on his death arc appellants before us, was employed as the General Manager ofMessrsJ. K, Iron and Steel Company Ltd., Kanpur. The terms of his employment as agreed upon by the assessee and the Company were incorporated in an appoint- ment. letter dated February 7, 1946. A formal memorandum of agreement was also executed 2 S.C.R. SUPREME dOUR T REPORTS 521 between the parties on February 9, 1946. The assessee actually joined the service of the company on May l, 1946. According to the service agree- ment the pay of the assessee wa' fixed at Rs. 2,000/- per month with an increment of Rs. 100/- p.a. subject to certain deductions for income-tax, absence of duty etc., which
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