TMI Blog2017 (2) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount received by the ex-employees was capital receipt. The word “compensation” is not defined under the Act. Therefore, one has to take into consideration the ordinary connotation of this expression in common parlance. It has to be in the nature of something awarded to compensate for loss, suffering or injury. When translated in the context of employment, it would imply a monetary and non-monetary amount to be given to the employee in return for some services rendered by him. Inherent in this would be the obligation of the employer to pay some amount to the employee to “compensate” him. It would also mean that the employee gets a vested right to get such an amount. In the case under consideration there the ex employee did not get vested right to receive the amounts in question. A settlement was arrived at to avoid litigation-there was no obligation on part of the employer to pay some amount to the employees to compensate them. Considering the peculiar facts and circumstances of the case, and relying upon the case of Arun Bhai R Naik (2015 (10) TMI 2434 - GUJARAT HIGH COURT ), we are of the opinion that the order of the FAA does not suffer from any legal or factual infirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on payment of the dues, that the employees raised and Industrial Dispute before the Central Government Industrial Tribunal (CGIT), Mumbai, that the dispute was decided in their favour as per the Award dated 30/12/2002, that a writ petition was filed by the assessee before the honorable Bombay High Court, that out of the group of 69 employees five employees approached the assessee for an out of court settlement, that these employees had reached superannuation age and were not desirous of seeking reinstatement, that an amicable settlement was arrived at with those employees, that Memorandum of Settlement was signed on 17/07/2006 at New Delhi with the Regional Manager that the memorandum was without the prior approval of the head office in Kuwait, that in the memorandum the ex-employees had agreed that they would be liable to pay their own individual taxes as per applicable law and no liability would accrue to the assessee for the same, that they also agreed to give up all their claims monetary/ nonmonetary against the assessee and not to file any other claim/proceedings of civil/ criminal nature, that the head office of the assessee did not approve the memorandum, that same was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at their actions and commitments had not been consistent with regard to their tax liability, that initially they had claimed that they were entitled to the net amount, that they agreed that they would be liable to pay their own individual tax as per the applicable law and no liability would accrue to the assessee for the same, that the ex-employees had received the full amount of the compensation without deduction of tax, that they had become liable for payment of taxes on the payments received from the assessee, that the assessee had been taken for a ride by the ex-employees so far as the payment/deduction of tax on compensation received by them was concerned. The F AA refer to the provisions of section 192 of the Act and held that as per the provisions of the section the persons making payment are required to deduct tax at source only if they make payment under the head salaries, that in the case under consideration the assessee had not made any payment to the five ex-employees, that the money had been recovered from the assessee forcibly, that it had, in the month of April, 2010. intimated the Additional CIT Range-26, Mumbai about the payment made to 5 ex-employees in term of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt, that there was no occasion for the it to deduct the taxes, that the employees had paid taxes on the amounts received from the assessee , that by the time FAA was deciding the appeal assessment of the ex-employees was also over, that there is a substantial time gap between the retrenchment and the attachment of the bank account of the assessee. Here, two things are noticeable first the assessee had not made any payment to its ex-employees. Section 17(3)(iii)of the Act presupposes the existence of an employment i. e. , a relationship of employee and employer between the assessee and the person who makes the payment of any amount in terms of section 17(3)(iii)of the Act. So, the words in section 17(3)(iii) cannot be read disjunctively to overlook the essential facet of the provision, the existence of employment i. e. , a relationship of employer and employee between the person who makes the payment of the amount and the assessee. In the case before us, the essential fact is missing. There was no employer-employee relationship between the assessee and the ex-employees. Secondly the ex-employees had paid the due taxes on the disputed amount. The assessee had claimed that it was u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view to bring an end to the litigation, that there was no obligation cast upon the employer to make such payment, that the amount would, therefore, not fall within the ambit of the expression profits in lieu of salary, as contemplated under section 17(3)(i). 5. 2. It is said that under clause (i) of section 17(3) of the Act, in order to characterise a particular payment received from the employer, on termination of the employment, as profits in lieu of salary , it has necessarily to be shown that this amount is due or received as compensation . The word compensation is not defined under the Act. Therefore, one has to take into consideration the ordinary connotation of this expression in common parlance. It has to be in the nature of something awarded to compensate for loss, suffering or injury. When translated in the context of employment, it would imply a monetary and non-monetary amount to be given to the employee in return for some services rendered by him. Inherent in this would be the obligation of the employer to pay some amount to the employee to compensate him. It would also mean that the employee gets a vested right to get such an amount. In the case under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
