Decretal amounts lose salary character for tax deduction at source unless the decree or statute expressly authorises withholding.

A sum payable under a civil decree does not retain the character of salary for tax deduction at source unless the decree or a governing statutory provision expressly permits it. Once claims for arrears of salary, compensation for wrongful termination, notice pay and interest are merged into a decree, the amount becomes a judgment debt executable under the Civil Procedure Code, not salary in the hands of the payer. The Income-tax Officer could not require withholding tax from that decretal amount, and the absence of an assessment or decree direction also defeated reliance on garnishee-like recovery provisions.

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Issues: Whether the amount payable under the decree retained the character of salary so as to attract deduction of tax at source under section 18 of the Income-tax Act, 1922, and whether the Income-tax Officer could require the appellant to withhold tax from that decretal amount.

Analysis: The statutory duty to deduct tax under section 18(2) arises only when the amount paid is salary payable as such. Once the respondent's claim for arrears of salary, compensation for wrongful termination, notice pay and interest was merged in a civil decree, the amount payable became a judgment debt to be executed according to the decree and the Civil Procedure Code. A substantial part of the decree represented compensation, and no provision in the decree directed deduction of income-tax. Section 46(5) could not assist the Revenue because no tax had been assessed against the respondent and, in any event, the Income-tax Officer could not invoke a garnishee-like process to intercept the decretal amount in execution. The authorities relied on concerned either interest expressly awarded as interest or assessed tax already recoverable, and were therefore inapplicable.

Conclusion: The decretal amount was not salary in the hands of the appellant for the purpose of section 18, and no deduction of income-tax at source could be made from it.

Final Conclusion: The decree had to be executed as a judgment debt, subject only to permissible execution adjustments, and the appellant could not withhold tax from the amount payable to the respondent.

Ratio Decidendi: A sum payable under a civil decree does not retain the character of salary for deduction of tax at source unless the decree or a governing statutory provision expressly permits such deduction; a judgment debt cannot be treated as salary merely because the underlying cause of action arose out of employment.

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