TMI Blog1961 (8) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... the State. His appointment was originally made by Ordinance No. 7 of 1947 which established the East Punjab University. The East Punjab Act No. 7 of 1947 took the place of this Ordinance, and under section 21 of this Act the assessee was appointed as the first Registrar of the University. Section 21 says nothing whatsoever regarding the terms of the office or the conditions upon which his services could be dispensed with. These, however, were set out in the Regulations of the University, and according to Regulation 1 at page 57 of the Punjab University Calendar for the year 1950-51, the assessee was removable on being given six months' notice. The wording of the Regulation is as follows: The Senate may appoint a person to be the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the forenoon of July 18, 1951, on the following conditions, be approved: (i) that Prof. D.N. Bhalla be paid six months' salary in lieu of notice and two months' additional salary in lieu of privilege leave earned by him; (ii) that he be paid usual contribution towards the provident fund for eight months referred to on in (i) above; (iii) that he be permitted to take up any other work during this period. A copy of this resolution was sent to the assessee and he was asked to send his bill for the amounts due under this resolution. A payment of ₹ 7,200 was, in due coursers, made to the assessee on account of six months' salary under clause (i) of the resolution, and the reference made to us is in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have been led through the facts of the case, and it has been argued on behalf of the assessee that the circumstances reveal quite clearly that the amount was paid solely by way of compensation and not in lieu of salary. The third alternative of the amount being in lieu of past services does not arise, because the payment clearly does not fall in that category. Our attention has been drawn to the fact that a notice was served upon the assessee in October, 1950, informing him that his services would be terminated on the expiry of six months. This notice was apparently in accordance with the terms of service as contained in regulation which has been quoted above. Objection was taken to this by the assessee and before us it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights and privileges and receive payment in lieu of them, that payment must be called compensation. On the other hand, it has been argued before us that the terms of employment were set out in Regulation I which required a notice of six months if the Punjab University wanted to terminate the assessee's services. In lieu of notice, six months' salary could be paid, and this was what was done in the present case. The payment in lieu of notice, therefore, was nothing more than the legal right of the assessee under the terms of employment and it could not be called compensation. I have pointed out that the first notice was not enforced by the Punjab University and the second notice was sent as the result of some negotiations which mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment as compensation and, therefore, it must have been so and it must have been arrived at as the result of a mutual agreement. Our attention has been drawn to a case of a somewhat similar nature reported as Guff v. Commissioner of Income-tax [1957] 31 I.T.R. 826. In this case an employee of a company was served with a notice in accordance with the terms of his employment. He continued to serve the company for a little more than seven months and then he was paid a sum of ₹ 12,000 on account of six months' salary and his services were terminated. The question arose whether this was revenue in lieu of salary or compensation in lieu of loss of employment. The Bombay High Court took the view that it was compensation in lieu of los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he was to be paid a sum of ? 10,000 if his services were terminated at the end of one year, it could not be called compensation . Compensation is something which is paid in lieu of loss of certain rights or privileges. In that case it was held that there was no question of any loss of legal rights, because the terms of the agreement were being strictly followed. The principle there laid down was followed by a division bench of the Patna High Court in Talwar v. Commissioner of Income-tax [1961] 41 I.T.R. 760. In that case a sum of ₹ 25,200 was paid in accordance with the terms of the agreement to the assessee. Following the principle laid down in Dale (Inspector of Taxes) v. de Soissons [1950] 32 Tax Cas. 118, the Patna High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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