TMI Blog1958 (10) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... ch moved the employer in making the payment was of remunerating or recompensating past services. Within its compass, have been all employees, high and low, regardless of nomenclature or designation. In 1937 the Maharaja of Bhavnagar appointed the assessee Mr. Anantrai Prabhashankar Pattani as the Chief Dewan of his State Mr. Pattani continued to hold that office till January, 1948, when responsible government was introduced in the State by the Maharaja. At that time Mr. Pattani was drawing a salary of ₹ 2,000 per month and enjoyed certain additional perquisites. On 22nd January, 1948, the Maharaja passed an order. By that order the Maharaja fixed a monthly pension for the retiring Chief Dewan at ₹ 2,000. An extract of that order is as follows : During our minority he (i.e., the Chief Dewan) looked well after us and during the difficult times of the last world war and thereafter he has rendered valuable services sincerely and conscientiously to us and our State with the result that the prosperity and reputation of the State have been enhanced and the position of the State and its subjects has received increased estimation in India. In appreciation thereof, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or received by an assessee from an employer or former employer or from a provident or other fund, is to the extent to which it does not consist of contributions by the assessee or interest on such contributions a profit received in lieu of salary for the purposes of this sub-section, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services : The Appellate Assistant Commissioner confirmed the order passed by the Income-tax Officer. The matter was carried by the assessee in appeal to the Tribunal and the Tribunal dismissed the appeal. The Tribunal in its order laid stress on the order of 27th December, 1950.It was not impressed and found it difficult to rely on the contents of the letter dated 10th March, 1953, written by the Maharaja to the assessee. The assessee has now come before us on this reference. The question we are called upon to determine is : Whether the sum of ₹ 5 lakhs has been properly brought to tax in the hands of the assessee for the assessment year 1951-52. It is argued by Mr. Kolah, learned counsel for the assessee, that the Tribunal was in error when it discarded the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or purpose of which was to remunerate or recompensate him for past services. Compensation for loss of employment stands on a different footing and we are not concerned here with that aspect of the rule for which the Explanation made an express provision by excluding from its purview any payment made solely as compensation for loss of employment. In our opinion, Explanation 2 even before its amendment did apply to the case of remuneration for past services received by an employee from his quondam employer. Then the matter was put on a different ground. It was urged that on a proper reading of the writing of 27th December, 1950, the dominant intention of the Maharaja was to make a gift pure and simple to the assessee, who had been fully remunerated for loss of service and also for past services by a full and generous pension equal to the amount of his salary, which was ₹ 2,000 per month. The argument has been that this payment of ₹ 5 lakhs was a personal gift and was nothing different from a voluntary payment given by way of a present or testimonial. Reference was made by Mr. Kolah to certain decisions to which we shall immediately turn. In the first case cited, Moo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , attended to that work. After the company was floated and after charges for that work were fully paid to the firm for the services rendered by it, one of the promoters as a token of appreciation for the assistance rendered to him by the assessee in connection with the floatation of the company made an unsolicited gift of 2,530 shares in the company to the assessee. It was held by the by High Court of Calcutta that as the contract of service was with the firm and not with the assessee and the assessee was not an employee of the promoters the value of the shares could not be assessed under section 7 as perquisites or profits received by the assessee in lieu of or in addition to salary or wages. It was, however, held on the facts of the case that the payment was not made in appreciation of the personality or character of the assessee but in appreciation of the professional services rendered by the assessee and in order to give him an extra profit over and above the share of the profit he may get from the firm, and the value of the shares was, therefore, assessable as the assessee's income under section 10 of the Income-tax Act. One of the contentions in that case was that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Mr. Kolah. One more decision to which our attention has been drawn by Mr. Kolah is Beynon v. Thorpe [1928] 14 Tax Cas.. That was a case of a pension to a retiring director of a company. It was the company's custom to give retiring employees voluntary pensions or allowances. In 1923 the directors passed a resolution awarding the respondent assessee during his retirement a pension of 5,000 a year. That resolution was rescinded in 1925 and a final payment of 5,000 was voted to the respondent not as or because he is a director but as a personal gift . An examination of the decision shows that these express words in the resolution weighed with the court when it reached the conclusion that it was not a taxable receipt. Mr. Kolah has relied upon the following observations of Rowlatt, J., in that case: Now the question is whether this ceases to be a mere gift because what has led to it is a past employment, an employment which has ceased. It has been made abundantly clear by the Court in Scotland in Duncan's case (supra) that this sort of sums received by a person cannot possibly be put as receipts from his office or in respect of his office or employment, and they s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyer when such intention is manifest. The transaction cannot be considered as if it were a series of separate compartments. Now, this is precisely what Mr. Kolah in effect is asking us to do. Counsel lays all the stress possible on the word gift and none on the words in consideration of having rendered loyal and meritorious services. The matter, after all is said, lies in a narrow compass. The principle is well denned and the difficulty, when it arises, is not in ascertaining the law, but its application to facts which are at times complex and sometimes vague and inadequate. At times the statement of the case itself is bald and meagre. Such, however, is not the position in the case before us in which the matter of the order dated 27th December, 1950, does not leave the object of the voluntary payment described as a gift to be gathered from implications of language used, or surrounding circumstances or mere inferences. We find no difficulty in applying the law to the facts of this case. We have the explicit and express words of the employer which leave no doubt about the dominant intention of the Maharaja as to the object and purpose of the payment. One case on the subject go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not know what motivated it, on the facts of the case before us, we must reach the conclusion that the case falls within the ambit of the section. We do so not without some reluctance. There remains for consideration the contention of the assessee that this was a casual and non-recurring receipt and, therefore, not liable to tax. Mr. Kolah rightly stated that if we take the view that the case is hit by section 7(1) read with Explanation 2, then there is little scope for this contention, and that even a single voluntary payment, if it falls within the ambit of that section, the receipt would be liable to tax and cannot be exempted from tax on the ground that it was merely a casual or non-recurring receipt. Once connection with the employment is established, there is no question of considering the recurring or the casual nature of the receipt. This contention of the assessee must also fail. Before we part with the matter, we may observe that the case before us has been argued by Mr. Kolah on the footing that the relationship of an employer and employee subsisted between the Maharaja and the assessee. Before the Tribunal the first contention urged by Mr. Tricumdas, who appeared ..... X X X X Extracts X X X X X X X X Extracts X X X X
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