Premature retirement lump sum treated as taxable salary income; exemptions for commuted pension and casual receipts rejected.

A lump sum paid to a government servant on premature retirement was treated as taxable income because it was calculated by reference to the salary he would have earned had service continued and was connected with employment. The payment fell within salary or, alternatively, the residuary income charge, and the statutory exclusions did not apply: it was not commuted pension, compensation for personal injuries, or a casual and non-recurring receipt of the protected kind. The amount was therefore held taxable and not exempt under the provisions invoked.

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Issues: Whether the lump sum paid to a government servant on premature retirement was taxable as income, and whether it was exempt under the statutory exceptions relating to capital receipts, compensation for injuries, commuted pension, or casual and non-recurring receipts.

Analysis: The payment was calculated with reference to the salary the assessee would have earned had he remained in service, and was intended to place him in the position he would have occupied but for premature retirement. Under the Indian Income-tax Act, income is chargeable unless expressly excluded, and the residuary head brought within tax net income not falling under the specific heads. The payment was therefore treated as remuneration connected with government service and taxable as salary or, alternatively, as income under the residuary provisions. The exemptions relied upon did not apply: the amount was not commutation of pension, not compensation for personal injuries, and not a casual receipt of the kind protected by the statute.

Conclusion: The amount was held taxable and not exempt under the provisions invoked; both referred questions were answered in favour of the Revenue.

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