Employment termination compensation treated as capital receipt where services ended after nationalisation of the employer.

Compensation received on termination of employment following nationalisation of the employer's undertaking was treated as a capital receipt rather than revenue income. The Supreme Court applied earlier decisions holding that such compensation is capital in character because it is paid for loss of the employment source itself, and accordingly it was not taxable as income. The amount was therefore held to be a capital receipt in the assessee's hands.

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Issues: Whether the compensation received on termination of employment was a capital receipt or a revenue receipt in the hands of the assessee.

Analysis: The receipt represented compensation paid for termination of the assessee's services consequent upon the nationalisation of the employer's undertaking. The Court noted that the question was covered by earlier decisions holding that compensation of this nature is capital in character and not taxable as income.

Conclusion: The amount received by the assessee was a capital receipt and not a revenue receipt. The issue was decided in favour of the assessee.

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