TaxTMI 
TaxTMI 
1960 (11) TMI 134
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....t; Clause 21 of the memorandum of agreement dated February 9, 1946, reads as follows : "21. If during the currency of this agreement, the employee desires to leave the services of the employers for any reasons whatsoever, he shall be at liberty to terminate the agreement by giving twelve calendar months' notice in writing only after repaying to the employer joining money and all expenses if they have been allowed to the employee, and the employers shall have full power to take all necessary steps in order to enforce such payment. The employers may terminate the service of the employee by giving twelve calendar months' notice in writing or in the case of breach of any of the terms or conditions contained herein at any time without any notice or paying any salary in lieu thereof." The assessee joined his post as general manager on May 1, 1946. The services of the assessee were, however, terminated with effect from August 31, 1947. It is the admitted case that the services of the assessee were not terminated for any default or misconduct on the part of the assessee, but the services were terminated because the company did not want to continue the assessee in thei....
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....se 21 of the contract of service and which the assessee actually received from the company in accordance with the terms of the contract of service. The contract provided that the period of service was for five years, but the period could be shortened and the services of the assessee could terminate even before five years on notice of twelve months on either side or on payment of salary in lieu thereof. Clause 21 of the contract of service stipulates that "the employers may terminate the services of the employee by giving twelve calendar months' notice in writing (or in the case of breach of any of the terms or conditions contained herein at any time without any notice) or paying any salary in lieu thereof." In the present case, therefore, there was no question of any breach of contract and there was no question of any right of service being given up by the assessee. It is not in my opinion correct to say that the assessee surrendered any rights under the contract. On the other hand, the assessee got exactly what he was entitled to get under his contract of employment. The amount of ₹ 25,200 is not, therefore, compensation for loss of office, but legally speaking....
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....h Colonel de Soissons was entitled to get under, and received from, his contract of service. The contract provided that he should serve either for three years at an annual sum or, if the company so elected, for a shorter period of two years or one year at the annual sum in respect of the two years or the one year, as the case might be, plus a further sum, that is to say it was something to which he became entitled as part of the terms upon which he promised to serve, something which he was entitled to receive in the particular event specified, namely, the term not running the three years but being earlier determined. I agree with the learned judge that there is a true analogy between this case and the cases to which I have referred, called Henry v. Foster [1932] 16 Tax Cas. 605, where the taxpayer received sums by virtue of the articles of association which were treated, for that purpose, as being a part of the contract of service." The same principle has been expressed by the Court of Appeal in an earlier case, Henry v. Arthur Foster and Henry v. Joseph Foster [1932] 16 Tax Cas. 605. The respondents in this case were directors of a limited company. They had no written contra....
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.... for his services as director." In my opinion, the principle of these authorities applies to the present case. It follows, therefore, that the amount of ₹ 25,200 paid to the assessee was part of the remuneration which the assessee was entitled to get under the contract of service. The amount paid to the assessee cannot, therefore, be treated as compensation for loss of employment within the meaning of Explanation 2 of section 7. The section as it stood prior to the amendment of 1955 reads as follows : "7. Salaries.-(1) The tax shall be payable by an assessee under the head 'Salaries' in respect of any salary or wages, any annuity, pension or gratuity, and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are due to him from, whether paid or not, or are paid by or on behalf of, the Government, a local authority, a company, or any other public body or association, or any private employer; and for the purposes of this subsection advances by way of loan or otherwise of income chargeable under this head shall be deemed to be salary due on the date when the advance is received :... Explanation 2.-A payment....