TMI Blog1965 (11) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... . SIKRI A. V. Viswanatha Sastri, 4. Ganapathy lyer, R. H. Dhebar and R.N. Sachthey, for the appellant. S. T. Desai, and J.P. Goyal, for the respondent. JUDGMENT SHAH J.--- Under an agreement dated January 2, 1931, Lala Manmohan Das-- hereinafter called the assessee --- was appointed treasurer of the Allahabad Bank Ltd. in respect of certain branches, sub-agencies and pay offices. The assessee was assessed to income-tax as representing his Hindu undivided family, and the income received by the assessee under the terms of the agreement with the Allahabad Bank was treated as income of the Hindu undivided family. In the previous year corresponding to the assessment year 1950-51, the assessee, in performing his duties as a treasurer, suffered a net loss of ₹ 38,027. For the assessment year 1951-52, the profit and loss account of the assessee showed ₹ 73,815 as receipts, against which were debited outgoings amounting to ₹ 39,370 which included ₹ 20,000 being the loss suffered by the assessee as treasurer of the Patna branch of the Allahabad Bank arising from misappropriation by an assistant cashier. The Income-tax Officer refused to allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss. The Income-tax Officer has under section 24(3) to notify to the assessee the amount of loss as computed by him, if it is established in the course of assessment of the total income that the assessee has suffered loss of profits. Section 24(2) confers a statutory right (subject to certain conditions which are not material) upon the assessee who sustains a loss of profits in any year in any business, profession or vocation to carry forward the loss as is not set off under sub-section (1) to the following year, and to set it off against his profits and gains, if any, from the same business, profession or vocation for that year. Whether the loss of profits or gains in any year may be carried forward to the following year and set off against the profits and gains of the same business, profession or vocation under section 24(2) has to be determined by the Income-tax Officer who deals with the assessment of the subsequent year. It is for the Income-tax Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. A decision recorded by the Income-tax Officer who computes the loss in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either by custom or contract usually devolve on a treasurer in the service of the bank including the duties, liabilities and responsibilities hereinafter mentioned and the treasurer shall faithfully discharge his duties and duly perform his obligations to the bank. (4) The treasurer shall with the approval of the bank appoint at adequate salaries to be paid by the bank all the Indian staff...... as may be considered sufficient by the bank for the business of the cash department of the bank's branches, sub-agencies and pay offices...... and shall dismiss any person or persons so appointed whom he shall be reasonably directed by the bank to dismiss and shall with like approval appoint another or others in the place of person or persons so dismissed. The treasurer shall be deemed to have appointed the present staff of the cash department of the branches, sub-agencies and pay offices aforesaid. Provided always that the bank shall accept any proposal of the treasurer for transfer, suspension or dismissal of any member of the cash staff in the bank. (5) The treasurer shall be responsible to the bank for the work and conduct of every person...... to be appointed or employed on h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bind his heirs, representatives and estate for any loss then accrued or accruing claim of the bank hereunder but also for any future claim of the bank in respect of any subsequent transaction or occurrence unless and until determined by his heirs or representatives giving like notice to the bank. The agreement contains certain peculiar covenants : for instance, the expression treasurer includes the heirs and representatives and except where the context may justify a contrary implication, the rights, obligations and liabilities of the treasurer would apparently be enforceable by or be enforced against the heirs and legal representatives of the assessee. The treasurer is entitled under the terms of clause (4) to transfer, suspend and dismiss any member of the staff in the cash department of the bank and his recommendation in that behalf has to be accepted by the bank. The treasurer has, if reasonably directed by the bank, but not otherwise, to dismiss any member of the Indian staff appointed by him, and to appoint another in the place of the person so dismissed. The staff in the cash department is referred in clauses (5), (6) and (7) as the treasurer's staff. Under claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d he was responsible for all acts of the staff so appointed which result in loss or damage to the bank. The treasurer was also responsible for the protection of the property of the bank and was also responsible for receipt of any bad or base-money, coin or bullion or any forged or fraudulenty altered currency note. Personal attendance by the treasurer and supervision over the staff in the cash section in all the branches and pay offices being in the very nature of things impossoble, it was open to the treasurer to appoint his own agents to supervise the work of the cash section. An office of treasurer was undoubtedly created by the agreement. It is recited in clause (1) that the treasurer shall serve the bank and in clause (3) that the duties, liabilities and responsibilities of the treasurer shall be such as by custom or contract usually devolve on a treasurer in the service of the bank. For performing these duties there is a fixed remuneration which is paid to the treasurer, besides the travelling expenses. But the use of the expressions serve the bank and in the service of the bank have to be read in the setting of the other covenants. By themselves they are not decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the manner in which the work is to be done. A distinction is also drawn between a contract for service and a contract of service and that distinction is put in this way : ' In the one case the master can order or require what is to be done while in the other case he can not only order or require what is to be done but how itself it shall be done '. After referring to a large number of cases, the court observed at page 160 : The nature or extent of control which is requisite to establish the relationship of employer and employee must necessarily vary from business to business and is by its very nature incapable of precise definition.... it is not necessary for holding that a person is an employee, that the employer should be proved to have exercised control over his work, that the test of control was not one of universal application and that there were many contracts in which the master could not control the manner in which the work was done ...... The correct method of approach, therefore, would be to consider whether having regard to the nature of the work there was due control and supervision by the employer or to use the words of Fletcher Moulton L. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice by the bank. In a reference made to the Industrial Tribunal of certain industrial disputes including one for reinstatement of Shivnandan, it was held by this court that, under the terms of the agreement between the treasurer and the bank, the treasurer was the servant of the bank and not an independent contractor. In coming to that conclusion the court was substantially guided by the covenants which reposed the direction and control over Shivnandan and of the ministerial staff in charge of the cash department in the bank. The covenants of the agreement between the treasurer and the bank disclosed that the treasurer had agreed to serve the bank and to obey and observe all lawful orders and instructions of the bank and to carry out such duties and to discharge such responsibilities as usually devolve upon a treasurer in the employment of the bank and in consideration thereof to receive remuneration mentioned in the schedule. The treasurer and his nominees were bound as expressly stipulated to obey all the orders, rules and regulations prescribed by the bank with regard to the discharge of their duties by the cashiers as well as with regard to the amount of balance they were all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that the treasurer was a servant of the bank and the emoluments received by the treasurer were in the nature of salary and assessable under section 7 of the Income-tax Act and not profits and gains of business under section 10. Some of the covenants of the contract between the Central Bank and the treasurer are similar to the agreement under consideration in this appeal, but in Piyare Lal Adishwar Lal's case this court founded its conclusion upon the existence of control and supervision of the bank over the treasurer and upon the power vested in the bank to summarily dismiss the treasurer in case of breach of any of the conditions of the agreement. In the present case there is no covenant which either expressly or impliedly confers upon the bank such control and supervision over the work done by the treasurer, and the agreement is not liable to summary determination. His duties, liabilities and responsibilities are to be such as either by custom or contract usually devolve upon the treasurers and those which are specified in the agreement. It is true that under clause (d) he has to transmit from one place to another place whenever so required, under such guard as ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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