Civil decree as judgment-debt bars tax deduction at source absent express statutory or decretal authorisation.

A sum merged in a civil decree becomes a judgment-debt, so it cannot be treated as salary for tax deduction at source unless the decree or an applicable statutory provision expressly authorises deduction. The decretal amount here included compensation for wrongful termination, arrears, notice pay, interest and costs, making it impossible to isolate any definite part as salary in the statutory sense. Section 46(5) was also inapplicable because it operates only where tax has already been assessed and remains unpaid; in the absence of any assessment against the decree-holder, no recovery could be directed from the decretal amount.

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Issues: (i) Whether the amount payable under the civil decree could be treated as salary so as to attract deduction of tax at source under section 18(2) of the Indian Income Tax Act; (ii) Whether, in the absence of any assessment of tax against the decree-holder, the Income Tax Officer could require deduction or recovery under section 46(5) of the Indian Income Tax Act.

Issue (i): Whether the amount payable under the civil decree could be treated as salary so as to attract deduction of tax at source under section 18(2) of the Indian Income Tax Act.

Analysis: The statutory obligation to deduct tax at the time of payment applies only where the amount is payable as salary. Once the employee's claim was merged in the civil decree, the amount became a judgment-debt. The decretal amount also comprised compensation for wrongful termination, arrears of salary, salary in lieu of notice, interest and costs, so it was not possible to identify the whole or any definite part of the decree as salary payable in the statutory sense. The decree had to be executed according to its tenor, subject only to deductions and adjustments permitted by the civil procedure law, and there was no provision in the decree authorising the employer to deduct tax from it.

Conclusion: The decretal amount was not salary for the purpose of deduction at source, and the employer was not entitled to deduct tax before paying it.

Issue (ii): Whether, in the absence of any assessment of tax against the decree-holder, the Income Tax Officer could require deduction or recovery under section 46(5) of the Indian Income Tax Act.

Analysis: Section 46(5) operates only where tax has already been assessed and remains unpaid. On the material before the Court, no assessment had been made against the decree-holder when the Income Tax Officer intervened. In that situation, the officer had no authority to invoke that provision or to obtain recovery through a garnishee-like direction to the civil court. The amount payable under the decree could not, in these circumstances, be treated as a fund from which unassessed tax could be recovered.

Conclusion: Section 46(5) was inapplicable, and the Income Tax Officer had no authority to insist on deduction or recovery from the decretal amount.

Final Conclusion: The decretal amount had to be paid in accordance with the civil decree, without deduction of tax at source, and the appeal failed.

Ratio Decidendi: A sum merged in a civil decree becomes a judgment-debt, and unless the decree itself or a statutory provision applicable to the particular payment authorises deduction, tax cannot be withheld at source merely because the original cause of action arose from employment.

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