View source for V.D. TALWAR V. THE COMMISSIONER OF INCOME-TAX, BIHAR INSC 72; AIR 1963 SC 1583; 1964 SCR 519

The  assessee,	Mr. V. D. Talwar, was  employed	 as  General
Manager by a company, According to the service agreement, he
was  to	 get  Rs. 2,000/- per month as his  salary  with  an
increment of Rs. 100/-- every year.  Deductions for  income-
tax,  absence  of duty etc. could be made from	his  salary.
The  agreement of service was for five years, but  the	same
could  be terminated earlier by the employer after giving  a
notice of 12 months or payment of salary in lieu thereof.
The  assessee joined as General Manager on May 1,  1946	 and
his  services  were terminated with effect from	 August	 31,
1947.	The services were not terminated for any default  or
misconduct  on the part of the assessee but were  terminated
because the company did not want to continue the assessee in
their  employment.  No notice of 12 months was given by	 the
company as required by the contract.  The comppany  actually
paid Rs. 18, 096/1/- which was the amount due as salary	 for
twelve months after deduction of Income-tax at the sours.
The Income-tax Officer held that the sum of Rs. 25,200/was a
revenue receipt of the assessee liable to be taxed under the
Indian	Income-tax  Act and fie rejected the  claim  of	 the
asscssec that the said sum was compensation for loss employ-
ment  and the tax amounting to Rs. 7,103/15/- should be	 re-
funded to him.	The appeal of the assessee' was accepted  by
the  Appellate Assistant Commissioner but his  decision	 was
reversed by the Income-tax Appellate Tribunal.	The question
of  law	 referred  by the Tribunal to  the  High  Court	 was
whether	 the sum of Rs. 25,200/- was revenue income`  of  he
assessee  or not.  The High Court gave the decision  against
the assessec who came to this Court by special leave.

Lawrence L. J. said at page 632 :

"'In my judgment, the determining factor in the present case is that the payment to the Respondent whatever the parties may have chosen to call it was a payment which the company had contracted to make to him as part of his remuneration for his services as a director. It is true that payment of this part of his remuneration was deferred until his death or retirement or cesser of office, and that in the articles it is called "compensation for loss of office." It is, however, a sum agreed to be paid in consideration of the Respondent accepting and serving in the office of Director, and consequentely is a sum paid byway of remuneration for his services as Director."
It seems to us that the same principle should apply in the present case. What has been paid to the appellant is his salary in lieu of notice. If that is the true position then the amount paid is taxable under s. 7 of the Indian Income- tax Act, 1922. It is not compensation for loss of employment within the meaning of Explanation 2 thereto. For the reasons given above we think that the High Court correctly answered the question. The appeal fails and is dismissed with costs.

Appeal dismissed.
[[Category:Supreme Court Of India Cases]]