TaxTMI 
TaxTMI 
2015 (9) TMI 851
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...., the following questions of law were framed: (a) Did the ITAT fall into error in holding that the sum of Rs. 1,95,00,000/- in the circumstances of the case, was compensation in the hands of the Assessee and could not be treated as income as profits in lieu of salary? (b) Did the ITAT fall into error in allowing the order of the CIT (Appeals) in allowing the credit of TDS of Rs. 22,09,350 on Rs. 1,95,00,000/- to the respondent? 3. The facts are that the Assessee filed return of income on 28th July, 2008 declaring total income of Rs. 1,65,70,750/- and also claiming a refund of Rs. 1369/-. The return was processed under Section 143(1) on 26th August, 2009 determining a refund of Rs. 860/-. 4. The case was subsequently selected for scr....
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...."as and when its operation starts". The second letter was dated 15th May 2007 which was the Assessee's response to ACEE that the news was a "big financial loss personally" since there were "many other opportunities available to me". The Assessee stated that since he had opted for ACEE he did not consider "other lucrative opportunities available to me". Since it was not clear when ACEE was going to start its new venture, the Assessee proposed that "your company must consider something for financial loss incurred by me not available other opportunities. I propose that you must give me at least one year compensation offered to me by your company to cover up the financial loss incurred by me". 6. On 25th August 2007, ACEE informed the Asse....
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....garding such TDS. The AO concluded that the payment was taxable under the head 'salary'. The addition of Rs. 1.95 crores was added to the returned income and penalty proceedings were also directed to be initiated. 8. The Assessee's appeal against the aforesaid order was allowed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) noted that Clause (iii) of Section 17(3) had been brought in to account for 'joining bonus' received from the prospective employer as profit in lieu of salary liable to be included as part of taxable income under the head 'salary' or also the amount paid to an employee 'after the employment comes to an end (termination bonus).' The CIT (A), after analysing the documents on record, came to the c....
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....2. On the facts and circumstances of the case and in law, whether the Ld. CIT (A) was correct in allowing the credit of TDS of Rs. 22,09,350/- on Rs.l.95 crore to the assessee?" 10. On the first issue, the ITAT concurred with the CIT(A) that prior to the coming into existence of any relationship of employer and employee between the Assessee and ACEE, the offer on the basis of which the employment agreement was drawn up had itself come to an end. This was a case where a prospective employee i.e. the Assessee had been compensated for denial of opportunity to be employed by the prospective employer. Therefore, the amount paid could not be said to be in lieu of the salary and a benefit of employment. On the second issue the ITAT observed that....
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....rly as possible", the intention and expectation of the parties was that the employment would commence not earlier than 1st July 2007. This becomes evident from a reading of the letter dated 1st May 2007 written by ACEE to the Assessee in which it stated that that it would not be possible to take the Assessee "on board from 1st July, 2007 as per employment contract." That the employment did not commence from the date of the Employment Agreement is further evident from the fact that ACEE stated in its letter dated 25th August 2007 that it was making the payment of Rs. 1.95 crores as "a one-time payment to you for non-commencement of employment as proposed." 14. The Court is unable to accept the interpretation sought to be placed on the plain....