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TMI Blog1955 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provisions of sub-section (1) of section 66: "(1) Whether in the facts and circumstances of the case and on a true construction of the agreement between the Central Bank of India and Shil Chandra, the salary and other emoluments received by Shil Chandra as treasurer of the said bank are assessable under the head 'Salary' or under the head 'Profits and gains of business'? and (2) Whether in the facts and circumstances of the case Shil Chandra's emoluments as treasurer of the Central Bank of India Limited were rightly assessed in the hands of the Hindu undivided family of which he is the karta?" The answer to the question whether the remuneration received by the assessee is assessable under the head "Salary" or under the head "Profits and gains of business" must turn on the decision of the question whether the assessee was, during the period to which the return relates, a servant of the bank or an independent contractor. A servant is a person subject to the command of his master as to the manner in which he shall do his work: Yewens v. Noskes [1880] L.R. 6 Q.B.D. 532 ; Goolbai v. Pastonji A.I.R. 1935 Bom. 333. An indep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lves on him and if all materials used in the work and all wages paid to the employees are provided by the persons for whom work is being done, the relationship would probably be that of master and servant. The written instrument which embodies the contract between the bank and Shil Chandra furnishes excellent evidence as to the nature of the relationship which subsists between them. It was executed on the 19th September, 1950. According to this document, Shil Chandra was deemed to be appointed treasurer of the bank with effect from the 16th April, 1950, of as many as seventeen branches, sub-offices and pay offices of the bank. He was to be responsible as treasurer of these several offices and was to employ all cashiers, potdars, peons, godownkeepers and such other persons as were necessary for the efficient working of the said offices. He had full control over the members of the staff and was at liberty to dismiss or transfer any of them, but he had no power to transfer any person who was not approved of by the bank and was under an obligation to dismiss any person engaged by him on being required so to do by the bank. He was to engage members of the cash department staff on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash department staff as were required by him. The fact that he was not bound to execute in person the work that he had undertaken to do strongly supports the assertion that he was an independent contractor, for an independent contractor is required only to produce certain specified results by any means which he thinks fit to employ. According to the terms of the contract, Shil Chandra had full power to appoint his representative and all members of the cash department staff. He could supervise their activities, could transfer them from one place to another and could terminate their services. This circumstance appears to indicate that he was an independent contractor. It is true that the bank had reserved to itself the right of requiring that he shall not engage or transfer any member of the cash department staff who had not been approved of by the bank and of demanding the dismissal of any member of the staff who had been engaged by him, but reservations of this kind cannot, in my opinion, affect the independence of the contractor. It has been held repeatedly that the right of an employer to demand the discharge or dismissal of servants of the contractor guilty of carelessness or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther take the shape of a lump sum payment to Shil Chandra who could disburse the salaries to the employees or it could take the shape of direct payments to Shil Chandra, his representative and the other members of the cash department staff. No explanation has been offered as to the reasons which impelled the parties to agree that the employees should be paid directly by the bank. It is possible that Shil Chandra did not have sufficient funds with him for making the payments to the men he had employed or that the bank wanted to be quite certain that the salaries were paid promptly and that the work did not suffer. It is equally possible that the arrangement was for convenience only. One of the terms of the contract declares that if Shil Chandra was unable to obtain the members of his staff on the salaries laid down by the bank, he was to pay the excess from his pocket. Another term provided that if he was unable to provide the requisite number of persons within a specified period, the bank had full power to engage the requisite number of hands whose excess salaries if any were to be "debitable to his account." These conditions make it quite clear that any payments which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in that case were not servants of a company. There can be little doubt that Shil Chandra's emoluments as treasurer of the bank were rightly assessed as the income of the Hindu undivided family of which he is the karta. He did not obtain this appointment on account of any personal qualifications; he obtained it (a) because his father, Adishwar Lal, was treasurer of the bank before him, and (b) because he furnished a substantial security for the good conduct and behaviour of the treasurer, the representative and the other members of the cash department staff. These securities were admittedly the property of the joint Hindu family of which Shil Chandra was a member and were liable to be appropriated by the bank for making good the losses, if any, which were caused by the negligence or carelessness of the treasurer or his servants. The Tribunal has expressed the view, with which I find myself in agreement, that there cannot be a plainer case of risk or detriment to the family property. Our attention has been invited to certain authorities in which it has been held that the sums payable to a person on account of director's fees cannot be regarded as the income of the joint H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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