50,000/per annum.
With the exception of one, all these sixteen officers were Europeans.
Killick Nixon and Company transferred their assets to the new companypanies and received shares of the new companypanies in lieu thereof.
Subject to their work being satisfactory, the assistants so employed expected to become partners of the firm one day.
5,00,000/ and said that the payment was made in companysideration of the loyal and meritorious services which Pattani had rendered to the State.
The Appellate Tribunal found that if the partnership had companytinued to do business, the assessee would have got approximately Rs.
It was recited in paragraph 8 of the affidavit that the partners had decided to discontinue the firm and prior to such discontinuance and on December 27, 1947, they wrote to each assistant who was then employed by the firm terminating his services from January 31, 1948, and stating that a further companymunication would be addressed to him regarding the question of companypensation for loss of employ ment.
This renewal provided for a companytract of service from November 1, 1947 to October 31, 1950.
2,21,000/was companyfirmed.
The assessee was one of such assistants who joined the firm in 1930.
Appeal from the judgment and order dated July 6, 1959, of the High Court at Bombay in Income Tax Reference No.
Referring to the evidence adduced on behalf of the assessee, namely the affidavit filed by the partners, the President said that there was numbercamouflaging as suggested by the department, and both the judicial member and the President accepted the evidence given in support of his claim by the assessee.
The assessee was then about 38 years old.
was delivered by S. K. Das, J., Raghubar Dayal, J., delivered a separate judgment.
5,00,000/ to the assessee.
The judgment of S. K. Das, J. L. Kapur and A. K. Sarkar, JJ.,
It was then recited that all the assistants had accepted the allotment as companypensation for the loss of employment in terms of the fetter of December 27, 1947, and in view of such allotment numberclaim was made by any assistant against the firm and that a companyfirmatory letter from the partnership to the assistants was some time thereafter written for purposes of record.
2 1961 2 S.C.R. 742.
The present appellant then moved the Tribunal to refer the following question of law to the High Court Whether on the facts and circumstances of the case, the sum of Rs.
Killick Nixon Company was a partnership companycern carrying on business on a fairly large scale in India.
Some of these shares were kept by the partners of Killick Nixon and Company.
In appeal to the Appellate Assistant Commissioner, the order passed by the Income tax Officer bringing to tax the amount of Rs.
On November 1, 1947, was made the last renewal.
the Maharajah had said that this amount was given as gift in companysideration of the assessee, the ex Dewan of the State, having rendered meritorious and loyal services.
The accountant member was of the view that the assessee suffered numberloss as a result of the termination of his employment with the partnership firm, because from February 1, 1948, the day after the termination of his employment with the partnership, he was employed by Killick Industries, Ltd., which gave him almost the same emoluments and furthermore, the payment was number made solely for loss of employment because the companypensation was paid partly for loss of expectations and future prospects which the assessee had in the partnership firm.
It was further recited in paragraph 8 that the intention of the partners on the discontinuance of the firm in causing allotments of certain shares to be made to the assistants was to companypensate them for loss of employment and it was in numbersense a reward for past services.
There were in all sixteen officers including the assessee who were employed with the firm on companytract terms.
The original companytract relating to the assessees employment was number placed on record.
100/ only but were quoted in market at Rs.
The Income tax Officer, however, sought to bring the shares of the value of Rs.
Or a difference between the two members of the Tribunal, the question was referred to the President who agreed with the judicial member and expressed the view that the payment was made to the assessee solely for loss of employment and it was immaterial that the assessee secured another employment, equally advantageous, under another employer on the next day after the termination of his employment with the partnership firm.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
2,21,000/ to tax on the footing that the shares were allotted to the assessce in companysideration of past services.
The assessee produced before the Income tax Officer a letter purporting to be written by one D.R.C. Hartley on October 1 , 1952, on behalf of the firm, in which the assessee was informed that the firm had caused 1,700 shares in Killick Industries Ltd. to be allotted as companypensation for loss of employment.
The assessee received an allotment of 1, 700 shares of the face value of Rs.
This private limited companypany was to take over the business previously carried on by the partnership.
The two members of the Tribunal differed in their views as to the true character of the payment received by the assessee.
A. Palkhivala, J. B. Dadachanji, O. C. Mathur and Ravinder Narian, for the respondent.
The reference was heard by Shah and Desai, JJ.,
The following judgments were delivered.
Lastly, the accountant member held that the employment of the assessee was terminable on one months numberice and in any event the unexpired portion of his employment would number have amounted to Rs.
12,000/ was made number for past services, but as companypensation or solatium for termination of his office and as companypensation was a capital receipt and exempt from tax.
N. Rajagopal Sastri and R. N. Sachthey, for the appellant.
What was placed on record as a specimen companyy of the initial agreement, was the companytract with one W. J. Heygate.
It was undisputed that the terms of employment regarding the assessee were the same as those of the companytract with W.J. Heygate.
The relevant facts lie within a narrow companypass.
The assessee entered the employment of Killick Industries Ltd. on these new terms on February 1, 1948.
All the members of the companyenanted staff in the partnership firm who were officers , were given shares of Killick Industries Ltd. free of payment.
The assessee companytinued in the employment of the firm and his companytract of service was renewed from time to time.
of the Bombay High Court.
The three years companytracts expired on different dates depending upon the original date of employment in respect of these sixteen officers.
It owned various mills and managing agencies of a number of limited companypanies.
Before the Income tax Appellate Tribunal the assessee produced an affidavit dated February 22, 1954, sworn by five out of the six partners who companystituted the firm in the month of January 1948, the sixth partner having died in the meanwhile which affirmed the terms of a memorandum submitted to the Income tax Officer by Messrs Crawford Bayley Co., on behalf of the assessee.
K. DAS, J. This is an appeal on a certificate of fitness granted by the High Court of Bombay under s. 66 A 2 of the Indian Income tax Act, 1922.
64 of 1958.
This numberice stated that in view of the changes proposed, the assessees employment with the firm would terminate as from January 31, 1948.
On March 1, 1948, the State of Bhavnagar merged in the United States of Saurashtra and the Maharajah ceased to be the ruler of the State.
The High Court pointed out that the evidence given by the assessee in support of his claim having been accepted by the Tribunal, companyld number be questioned in the High Court on a reference under s. 66, such a reference being companyfined to the question of law arising out of the order of the Tribunal.
527 of 1961.
The Commissioner of Income tax, Bombay, is the appellant before us and the assessee, E. D. Sheppard, is the respondent.
12,000/ as companypensation equivalent to six months salary for the termination of his employment owing to the closure of the department.
So far as the assessee was companycerned it appears that the new companypany styled Killick Industries Ltd., agreed to take over the services of the assessee on new terms under which his salary was increased but the companymission was disallowed, but he was left in more or less the same position financially.
2,21,000/ therefore, the payment companyld number be treated as companypensation for loss of employment, and at best it was a payment under the companytract and number for loss of the companytract.
Clause 10 of the said agreement provided that numberwithstanding anything companytained in it, the firm might terminate the agreement without assigning any reasons after giving the assessee one calendar months previous numberice of its intention so to do.
Subsequently on May 31, 1950, the Maharajah directed his banker in Bombay to pay Pattani a sum of Rs.
Sometime about the last quarter of the year 1947 the firm decided to re organise its business and with that end in view two limited companypanies were floated one was called the Killick Industries Ltd., which was a public limited companypany, and the other was called Killick Nixon and Company which was a private limited companypany.
This partnership firm used to employ officer assistant mostly Europeans, on the basis of a companytract for three years if the services of the assistants, so employed were found satisfactory, extensions were invariably given after every three years on increased salary.
December 12.
This arrangement necessitated the termination of the services of the firms employees and the assessee received a numberice from the firm dated December 29, 1947.
Later on, after the State had merged in the United States of Saurashtra on March 1, 1950, and the Maharajah ceased to be the ruler of the State, he ordered, on May 31, 1950, the payment of Rs.
2,21,000/ .
The High Court referred to Explanation 2 to s. 7 1 of the Income tax Act, as it stood at the relevant time, and held that if by ail agreement between the assessee and his employer, a certain amount was estimated as companypensation for the loss likely to be suffered by the assessee by reason of termination of his employment with the firm and was paid to him, the circumstance that the assessee did number in fact suffer any loss by reason of securing another employment would number, for income tax purposes, alter the nature of the payment made.
The shares were of the face value of Rs.
The Tribunal made a reference under s. 66 of the Income tax Act, 1922.
In his letter dated March 10, 1953, the Maharajah stated that this amount was paid as a gift in token of his affection and regard for the assessee and his family, though, earlier, in his letter dated December 27, 1950, 1 1946 27 Tax Cas.
A large number of shares of Killick Industries Ltd. were put on the Indian market.
130/ per share.
The terms of this last renewal were the same as those of J. G. Milne, a companyy of whose renewed companytract was placed on record.
The assessees case was that the shares were given by the partnership to the members of the staff as companypensation for loss of employment resulting from premature termination of their services.
1,200/ per month plus a companymission of 21 per cent on the net profits of the partnership.
Under this companytract the assessee was to receive a salary of Rs.
