https://www.taxtmi.com/caselaws?id=187894 A payment made on termination of the legal employer-employee relationship is treated as salary under Explanation 2 to section 7(1) of the Income-tax Act, 1922 only if it is remuneration for past services; where it is solely compensation for loss of employment, it is not taxable as salary. The decisive inquiry is whether the original employment relationship had ended, and immediate engagement by another concern does not by itself alter the character of the payment. On the stated facts, the correspondence supported a genuine compensation arrangement, so the amount was treated as capital receipt for loss of employment rather than salary income. en-us Tue, 07 Oct 1958 00:00:00 +0530 Thu, 10 Nov 2016 14:43:09 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=187894 A payment made on termination of the legal employer-employee relationship is treated as salary under Explanation 2 to section 7(1) of the Income-tax Act, 1922 only if it is remuneration for past services; where it is solely compensation for loss of employment, it is not taxable as salary. The decisive inquiry is whether the original employment relationship had ended, and immediate engagement by another concern does not by itself alter the character of the payment. On the stated facts, the correspondence supported a genuine compensation arrangement, so the amount was treated as capital receipt for loss of employment rather than salary income. Case-Laws Income Tax Tue, 07 Oct 1958 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=187894