TMI Blog1960 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent. As between the appellant company and the respondent, the amount did not represent salary ; it represented a judgment debt and for payment of income-tax thereon, no provision was made in the decree. The Civil Procedure Code bars an action of the nature which was filed in Westminster Bank's case. The defence to the execution, if any, must be raised in the execution proceeding and not by a separate action. The amount payable by the appellant company to the respondent was not salary but a judgment debt, and before paying that debt the appellant company could not claim to deduct at source tax payable by the respondent. Nor could the appellant company seek to justify its plea on the ground that the judgment creditor was indebted to a third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -0 decreed against him in a cross-suit filed by the appellant company. The Income-tax Officer, Nagpur, served a notice under section 46 of the Indian Income-tax Act upon the respondent and also gave intimation to the District Judge, Nagpur, that the appellant company be permitted to deduct at source and to pay into the Government Treasury Rs. 15,956-13-0 as income-tax, surcharge and super-tax due on the sum of Rs. 50,972-2-0 awarded to the respondent. The appellant company also applied that the executing court do declare that the appellant company was entitled and in law bound to deduct the tax due on the amount. The learned judge directed the appellant company to pay to the Income-tax Department Rs. 15,956-13-0 on account of income-tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent. Under section 46(5), any person paying salary to an assessee may be required by the Income-tax Officer to deduct arrears of tax due from the latter and the employer is bound to comply with such a requisition and to pay the amount deducted to the credit of the Government. But this order can only be passed if income-tax has been assessed and has remained unpaid. It is undisputed that at the material time, no tax was assessed against the respondent ; the Income-tax Officer had, accordingly, no authority to issue a notice under section 46(5). Nor could the Income-tax Officer claim to recover tax due by a proceeding in the nature of a garnishee proceeding by applying to the civil court to attach the judgment debt payable by the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wits the amount decreed against which was set off the claim under the cross decree. A substantial part of the claim decreed represented compensation for wrongful termination of employment and it would be difficult to predicate of the claim sought to be enforced what part thereof, if any, represented salary due. Granting that compensation payable to an employee by an employer for wrongful termination of employment be regarded as in the nature of salary, when the claim is merged in the decree of the court, the claim assumes the character of a judgment debt, and to judgment debts section 18 has not been made applicable.The decree passed by the civil court must be executed subject to the deductions and adjustments permissible under the Code of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and pounds 10,028 as interest. The bank thereafter brought an action for a declaration that it had satisfied the judgment in the action by R by paying him the amount due less pounds 5,014, the latter sum representing income-tax on the interest awarded by the judgment. It was held by the House of Lords that pounds 10,028 was " interest of money " within Schedule D and General Rule 21 of the Income Tax Act, 1918, and that income-tax was deductible therefrom. In that case, the only argument advanced on behalf of the bank is set out in the speech of Viscount Simon, L. C., at page 187 : "The appellant contends that the additional sum of pounds 10,028, though awarded under a power to add interest to the amount of the debt, and though called in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the respondent was not salary but a judgment debt, and before paying that debt the appellant company could not claim to deduct at source tax payable by the respondent. Nor could the appellant company seek to justify its plea on the ground that the judgment creditor was indebted to a third person. The principle of the case in Manickam Chettiar v. Income-tax Officer on which reliance was also sought to be placed by the appellant company has no application to this case. In Manickam Chettiar's case in execution of a money decree certain properties belonging to a judgment debtor were attached and sold and the sale proceeds were received by the court. The Income-tax Officer who had assessed the decreeholder to tax payable by him on his ot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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