# [1966] 2 S.C.R. 531

- **Citation:** [1966] 2 S.C.R. 531
- **Court:** Supreme Court of India
- **Decided:** 1965-11-05
- **Case number:** Civil Appeal No. 512 of 1964
- **Bench:** K. SUBBA RAo, J. C. Shah Ands. M. S!Kri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1966-2-s-c-r-531-3618
- **Pages:** 13

## Headnote

Income-tax Act (11 of 1922), ss. 10 and 24-Treasurer of Bank-If
"vocarion"-Right of assessee to carry forward loss of one year to subseqllent year and set off against profit-Scope of.
The respondent was appointed Treasurer of a Bank in respect of
certain of its branches, sub-agencies and pay offices.
In the pre,·ious
year corresponding to the assessment year 19)0-51, he suffered a loss in
performing his duties as Treasurer. But the Income-tax Officer, in assessing the respondent to income-tax, declared that the loss could not be
carried forward to the next year under s. 24(4) of the Income-tax Act,
1922, on the ground that it was not a business loss. For the assessment
year 1951-52, the Income-tax Officer refused lO allow the loss to be set
off against the net profit for the year and brought that amount of profit
to tax as remuneration received by the respondent as Treasurer of the
Bank. The order was confirmed by the Appellate Assistant Commissioner..
but. the Appellate Tribunal held that the remuneration received by the
respondent was income arising from the pursuit of a profession or vocation
within the meaning of s. 10 of the Act and therefore the loss suffered
during the preceding year could be set off against his income in the subsequent year. On a reference the High Court agreed with the Tribunal.
In appeal to this Court,
HELD : (i) The decision recorded by the Income-tax Officer, who
computed the loss in the previous year under s. 24(3), that the loss could
not be set off against the income of the subsequent year was not binding
on the respondent, as, under s. 24(2), 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. [534 A-CJ
(ii) The use of the expressions "serve the Bank" and "in the service
of the Bank" in the contract appointing the respondent as Treasu:er of
the Bank have to be read in the setting of the other convenants and are·
not decisive of the question whether the respondent was a servant of
the Bank. Under the contract the respondent had to procure due performance of the duties of the cash department by employees under his supervision and he was to be responsible for all acts done by them and to
make good the loss which might result from any embezzlement, theft,
fraud, misappropriation, mistake,
misconduct,
omission, negligent
act
or default of any such person. In carrying out his duties under the contract
he was not to be controlled or supervised by the Bank and the agreement
was not liable to summary determination. The contract was therefore for
service and the respondent could not be called a servant of the Bank .
Therefore, the remuneration received by him was not "salaries" within·
the meaning of s. 7 of the Act. [538 F-G; 540 E-F; 543 BJ
Section 24(2) confers a statutory right upon the assessee who sustains
a loss of profits in any year in any business, profession or vocation to
carry forward so much of the loss as is n?t set .off under sub-s .. 0) t.o
the following year, and to set it off against hts profits and gams, if
532
SUPREME COURT REPORTS
(1966] 2 S.C.R.
.any, from the same business, profession or vocation for that year. The
A
occupation of a Treasurer is not a profession, nor does it partake of the
·Character of a business or trade. But taking into consideration the nature
of the duties performed, and the obligation undertaken, together with
the right to remuneration subject to compensation for loss arising to the
Bank from his own acts and omissions or of the servants introduced by
him into the business of the Bank, the respondent could be regarded as
following a vocation.
His remuneration must therefore be computed
·under s. 10 and loss of profit suffered in that vocation in any year could
B
be carried forward to the next year and be set off against the profit of
that year.
[543 B, C-D, F-G]
Dharangadhara Chemical Works Ltd. v. State of Saurashtra, [1957]
S

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COMMISSIONER OF INCOME-TAX, UITAR PRADESH
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MANMOHAN DAS
November 5, 1965
[K. SUBBA RAo, J. C. SHAH ANDS. M. S!KRI, JJ.]
Income-tax Act (11 of 1922), ss. 10 and 24-Treasurer of Bank-If
"vocarion"-Right of assessee to carry forward loss of one year to subseqllent year and set off against profit-Scope of.
The respondent was appointed Treasurer of a Bank in respect of
certain of its branches, sub-agencies and pay offices.
In the pre,·ious
year corresponding to the assessment year 19)0-51, he suffered a loss in
performing his duties as Treasurer. But the Income-tax Officer, in assessing the respondent to income-tax, declared that the loss could not be
carried forward to the next year under s. 24(4) of the Income-tax Act,
1922, on the ground that it was not a business loss. For the assessment
year 1951-52, the Income-tax Officer refused lO allow the loss to be set
off against the net profit for the year and brought that amount of profit
to tax as remuneration received by the respondent as Treasurer of the
Bank. The order was confirmed by the Appellate Assistant Commissioner..
but. the Appellate Tribunal held that the remuneration received by the
respondent was income arising from the pursuit of a profession or vocation
within the meaning of s. 10 of the Act and therefore the loss suffered
during the preceding year could be set off against his income in the subsequent year. On a reference the High Court agreed with the Tribunal.
In appeal to this Court,
HELD : (i) The decision recorded by the Income-tax Officer, who
computed the loss in the previous year under s. 24(3), that the loss could
not be set off against the income of the subsequent year was not binding
on the respondent, as, under s. 24(2), 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. [534 A-CJ
(ii) The use of the expressions "serve the Bank" and "in the service
of the Bank" in the contract appointing the respondent as Treasu:er of
the Bank have to be read in the setting of the other convenants and are·
not decisive of the question whether the respondent was a servant of
the Bank. Under the contract the respondent had to procure due performance of the duties of the cash department by employees under his supervision and he was to be responsible for all acts done by them and to
make good the loss which might result from any embezzlement, theft,
fraud, misappropriation, mistake,
misconduct,
omission, negligent
act
or default of any such person. In carrying out his duties under the contract
he was not to be controlled or supervised by the Bank and the agreement
was not liable to summary determination. The contract was therefore for
service and the respondent could not be called a servant of the Bank .
Therefore, the remuneration received by him was not "salaries" within·
the meaning of s. 7 of the Act. [538 F-G; 540 E-F; 543 BJ
Section 24(2) confers a statutory right upon the assessee who sustains
a loss of profits in any year in any business, profession or vocation to
carry forward so much of the loss as is n?t set .off under sub-s .. 0) t.o
the following year, and to set it off against hts profits and gams, if
532
SUPREME COURT REPORTS
(1966] 2 S.C.R.
.any, from the same business, profession or vocation for that year. The
A
occupation of a Treasurer is not a profession, nor does it partake of the
·Character of a business or trade. But taking into consideration the nature
of the duties performed, and the obligation undertaken, together with
the right to remuneration subject to compensation for loss arising to the
Bank from his own acts and omissions or of the servants introduced by
him into the business of the Bank, the respondent could be regarded as
following a vocation.
His remuneration must therefore be computed
·under s. 10 and loss of profit suffered in that vocation in any year could
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be carried forward to the next year and be set off against the profit of
that year.
[543 B, C-D, F-G]
Dharangadhara Chemical Works Ltd. v. State of Saurashtra, [1957]
S.C.R. 152, followed.
Shivnandan Sharma v. The Punjab National Bank Ltd. [1955] 1 S.C.R.
1427 and Piyare Lal Adishwal Lal v. Commissioner of Income-tax, Delhi
40 I.T.R. 17, distinguished.
C
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 512 of
1964.
Appeal from the judgment and decree dated December 23,
1960 of the Allahabad High Court in Income-tax Misc. Case
No. 475 of 1954.
A. V. Viswanatha Sastri, R. Ganapathy Iyer, R. H. Dhebar
and R. N. Sachthey, for the appellant.
S. T. Desai, and J.P. Goyal, for the respondent.
The Judgment of the Court was delivered by
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Shah, J, Under an agreement dated January 2, 1931, Lala E
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
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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 Rs. 38,027. For the
assessment year 1951-52, the profit and loss account of the assessee
showed Rs. 73, 81 S as receipts, against which were debited outgoings amounting to Rs. 39,370 which included Rs. 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 the
loss suffered in the previous year to be set off against the net
profit of Rs. 34,445 and brought that amount of profit to tax
as remuneration received by the assessee as Treasurer of the
Allahabad Bank. The order of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner. The
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533
Income-tax Appellate Tribunal held that the remuneration
received by the assessee as Treasurer of the Allahabad Bank was
income arising from pursuit of a profession or vocation within
the meaning of s. 10 of the Act and the loss suffered during the
preceding year was liable to be set off against the assessee's
income from that source in the year under consideration.
At the instance of the Commissioner of Income-tax, U.P.,
the following questions were referred to the High Court of
Allahabad under s. 66(1) of the Income-tax Act, 1922:
"(l) Whether on a true interpretation of the deed
of agreement dated 2nd January, 1931, appointing the
assessee as Treasurer of the Allahabad Bank Limited,
income earned by the assessee from his activities as such
Treasurer fell to be computed under Section 10 of the
Act or Section 7 or Section 12 of the Income-tax Act?
If the answer to this question is that such income is
liable to be computed under Section 10 of the Act,
(2) Whether the assessee could clain1 a set off of the
loss suffered by him in the preceding year 1950-51
against his profits in the year under consideration, i.e.,
1951-52 having failed to prefer an appeal against the
refusal by the Income-tax Officer making the assess·
ment for the year 1950-51 to allow the assessee to carry
forward the loss under Section 24(2) of the Act ?"
The High Court held that the remuneration received by the
asses.see from the Allahabad Bank was income liable to be taxed
under s. 10 of the Income-tax Act, and that the assessee could
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claim to set off the loss computed in the assessment year 1950-51
against the profit in the subsequent year. With certificate granted
by the High Court, this appeal has been preferred by the Commissioner of Income-tax.
The second question presents little difficulty.
In making his
order of assessment for the year 1950-51 the Income-tax Officer
G declared that the loss computed in that year could not be carried
forward to the next year under s. 24(2) of the Income-tax Act,
as it was not a business loss.
The Income-tax Officer has under
s. 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
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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
L3Sup. CI/66-4
534
SUPREME COURT REPORTS
(1966] 2 S.C.R.
the loss as is not set off under sub-s. ( 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
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the same business, profession or vocation under s. 24(2) has to
be determined by the Income-tax Oflicer who deals with the
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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 previous year under s. 24(3)
that the loss cannot be set off against the income of the subsequent year is not binding on the assessee.
The answer to the first question depends upon the true interpretation of the terms of the agreement between the Allahabad
Bank and the assessee. If under the terms of the agreement it
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is found that the assessee was carrying on a business, profession
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or vocation, the assessee would be entitled to carry forward the
loss suffered therein and set it off against the profits in the subsequent year of the same business, profession or vocation under
s. 24(2).
If the remuneration was received by the assessee as
a servant of the Bank, and on that account has to be computed
under s. 7 of the Act, the right to set off the loss cannot be E
claimed under s. 24(2). The fact that the assessee held an office
is however not decisive of the question whether remuneration
earned by him was as a servant of the Allahabad Bank. Receipt
of remuneration for holding an office does not necessarily give
rise to a relationship of master and servant between the holder
of the office and the person who pays the remuneration.
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The agreement is between the Allahabad Bank Ltd. and Lala
Manmohan Das-called in the agreement "Treasurer", and the
expression Treasurer includes "his heirs and representatives". By
cl. 2 it is recited that the Treasurer is appointed for the Bank's
Branches and Sub-Agencies and Pay Offices mentioned therein
and such other offices in other parts of India for which he may
be appointed, and that the Treasurer has agreed to provide
security to the Bank for the due discharge and performance of
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his duties and obligations to the Bank.
The agreement then
proceeds to set out the conditions of the agreement, the following of which are relevant :
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(1) "The Treasurer shall serve the Bank as
Treasurer for its Branches, Sub-Agencies and Pay
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Offices
until this agreement is determined
as hereinafter provided."
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(2) "The remuneration of the Treasurer shall be a
monthly allowance for each of the Branches, SubAgencies and Pay Offices
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, the total of such
monthly allowance to be Rs. 2,250 (Rupees two
thousand two hundred and fifty) plus Rs. 350 (Rupees
three hundred fifty) for travelling expenses."
( 3) "The duties, liabilities and responsibilities of the
Treasurer to the Bank shall be such as 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 disniissal 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
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be appointed or employed on his staff and shall make
good to the Bank any loss or damage sustained or in"
curred by the Bank from any embezzlement, theft,
fraud, misappropriation, misconduct, mistake, omission
negligent act or default of any such person or persons.':
(6) "The Treasurer shall keep under his care and
supervision or that of his staff the moneys, cash, bullion
securities, cheques, notes, hundies, drafts, orders and
535
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SUPREME COURT REPORTS
[1966] 2 S.C.R.
other documents or property which may from time to
time be entrusted to him at the Branches, Sub-Agencies
and Pay Offices
and shall whenever so
required to do so tra_nsmit from one place to another
place under such guard as may be provided by the Bank
all such money, documents or properties and shall be
responsible for the care and proper custody of the same
while in transit. That the Bank shall for the efficient
working of its Cash Department provide proper iron
safes and a strong room in each of the said Branches,
Sub-Agencies and Pay Offices and the Treasurer shall
be responsible to the Bank for any loss occasioned to
the Bank through the negligence, malfeasance or misfeasance of any of his servants or agents by the payment
or delivery of any money, document or property aforesaid to a wrong person whether owing to forgery, mistake, fraud or otherwise."
(7) "The Treasurer shall be responsible for the correctness and genuineness of all hundies, cheques, drafts,
securities, vouchers, documents, writing and signature
in an Indian language or character which the Treasurer
or any of his staff may accept and certify as genuine and
correct and shall make good to the Bank any loss or
damage from any forged instrument or signature on a
document as dealt with and shall also be liable for any
loss occasioned to the Bank by receipt of any bad or
base-money coin or bullion or any forged or fraudulently altered currency note."
(9) "The Treasurer shall not nor shall any substitute or any one of the staff of the Treasurer publish or
divulge any of the business affairs or transactions of the
Bank or any of its constituents."
(10) "The Treasurer's employment
may
be determined at any time by either party giving to the
other three calendar months written notice to that effect,
and in case of the Treasurer's death, this agreement as
regards the Treasurer's liabilities and obligations for
the staff and other persons shall remain in force so a8 to
bind his heirs, representatives and estate for any Joss
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
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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,
B 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 nnder
the terms of cl. ( 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
c 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 els. (5), (6) & (7)
as the Treasurer's staff. Under cl. (4) all the staff originally in
the employment of the Bank at the date of the agreement and
D the staff subsequently appointed were to be paid by the Bank, but
the Treasurer was to stand responsible for any loss or damage
which may be sustained not only for embezzlement, theft, fraud,
misappropriation, misconduct, but even for mistake, omission,
negligent act or default of any member of the staff. The Treasnrer
has by the agreement undertaken to keep the moneys, cash,
E bullion, securities, cheques, notes, hundies, drafts, orders, and
other documents or property under his care and supervision
through his staff, and is liable to protect the property of the Bank
in his custody, and has to make good any loss occasioned to the
Bank by the negligence, malfeasance or misfeasance of any of
"his servants or agents" even though not belonging to the Cash
11
Department.
The Treasurer is responsible for the "correctness
and genuineness" of all hundies, cheques, drafts, securities,
vouchers, documents, writing and signature in an Indian language
and he is responsible for any loss or damage from any forged
instrument or signature on a document dealt with by his staff, and
also for any loss arising from receipt of any bad or base-money
G coin or bullion or any forged or fraudulently altered currency note.
~t may be noticed that the liability imposed under that covenant
IS for the acts of the staff appointed by him or deemed to have
been appo?i:ted by him within the meaning of cl. ( 4), and also
for loss ansmg from the receipt of any bad or base-money coin
H or bullion or any forged or fraudulently altered currency note by
any person employed by the Bank. The agreement also contemplates that the Treasurer may appoint any substitute to carry on
the work of the Bank.
The Treasurer is under the acrreement
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538
SUPREME COURT REPORTS
[1966] 2 S.C.R.
responsible for the acts of the Indian staff at the Branches, SubA
Agencies and Pay Offices as far apart as Calcutta, Lahore,
Lucknow, Patna, Amritsar, Benaras and Secunderabad.
On a fair reading of the terms of the agreement it appears
that the Treasurer had to provide the staff for the cash section : B
he had power to suspend, transfer or dismiss any member of the
staff or to appoint another person in his place : he had to perform
the duties, liabilities and responsibilities which by custom or. contract usually devolve upon a Treasurer and the duties specified in
the agreement, and he was responsible for all acts of the staff so
appointed which result in loss or damage to the Bank. The C
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 fraudulently 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 impossible, it was
I>
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 agree·
ment. It is recited in cl. (1) that the Treasurer shall serve the
Bank and in cl. (3) that the duties, liabilities and responsibilities E
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, beside 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 themF
selves they are not decisive of the intention of the parties to the
agreement. The office of the Treasurer can be determined only by
notice on either side of a' duration of three months, arid even on
the death of the assessee, the Treasurer's obligations accrued or
accruing during his life-time, and future claims in respect of any
transactions, even subsequent to his death, remain enforceable.
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Express reference to liability of the Treasurer for future claims
for subsequent transactions clearly indicates that the agreement
does not come to an end by the death of the assessee : it is determined only by notice of three months' duration.
Liability for
transactions subsequent to the death of the person for the time ·
being acting as Treasurer remaining enforceable, it is reasonable H
to infer that the right to receive remuneration would enure to
the person who would step into the office of the Treasurer.
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539
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The office of Treasurer is therefore to be held by the assessee,
and after his death by his heirs and legal representatives. It is
unnecessary to consider whether the agreement would be determined by any supervening disability of the Treasurer, which may
render the contract impossible of performance. But the Treasurer
holds the office not as a servant of the Bank. The Treasurer has
B unquestionably undertaken very onerous responsibilities.
There
is however no covenant which authorises the Bank to control the
Treasurer in the due performance of duties undertaken by him
under the terms of the agreement.
Business of the Bank has
undoubtedly to be carried on in the manner normally done by
the Banks, and the duties, liabilities and responsibilities of the
C Treasurer are to be such as "either by custom or contract usually
devolve on a Treasurer". The Bank pays the Indian staff in the
Cash Department, but the control is of the assessee.
He has
control over the staff appointed by him or deemed.to be appointed
by him : he has therefore the power to initiate proposals for
transfer, suspension or dismissal of any member of the cash staff.
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This Court in Dharangadhara Chemical Works Ltd. v. State
of Saurashtra( 1) observed :
"The principles according to which the relationship
as between employer and employee or master and
servant has got to be determined are well settled. The
test which is uniformly applied in order to determine the
. relationship is the existence of a right of control in respect 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 cannot
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 a.
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"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
(I) [1957] S.C.R., 152, 157.
54 0
SUPREME COURT REPORTS
(1966] 2 S.C.R.
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.J., at page 549 in Simons v. Health Laundry Company-[(1910) 1 K.B. 543] :-
"
it is impossible to lay down any rule
of law distinguishing the one from the other. It is a
question of fact to be decided by all the circumstances
of the case. The greater the amount of direct control
exercised over the person rendering the services by the
person contracting for them the stronger the grounds
for holding it to be a contract of service, and similarly
the greater the degree of independence of such control
the greater the probability that the services rendered are
of the nature of professional services and that the contract is not one of service"."
Under the contract the Treasurer had to procure due performance
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of the duties of the Cash Department by employees under his
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supervision and that he was to be responsible for all acts done by
them and to make good the loss which may result from any embezzlement, theft, fraud, misappropriation, mistake, misconduct,
omission, negligent act or default of any such person. In carrying out his duties under the contract apparently he was not to be
controlled or supervised by the Bank. The contract was therefore
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one for service and the Treasurer could not be called a servant
of the Bank.
But Mr. Sastri on behalf of the Revenue contended relying
upon Shivnandan Sharma v. The Punjab National Bank Ltd.(')
and Piyare Lal Adishawar Lal v. Commissioner of Income-tax,
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Delhi(2 ), that under the contracts substantially similar to the contract in this case, Treasurers were held merely to be servants of
the Banks, business whereof they attended. It is true that in each
of these cases this Court in interpreting a contract in which a
Treasurer was appointed to supervise the Cash Department of a
Bank, held that the Treasurer was a servant of the Bank, and not
H
an independent contractor. But unless the terms of the contracts
(I) [1955] I S.C.R. 1427.
(2) [1960] 3 S.C.R. 669.
,
f
•
'
c.J.T. v. MANMOHAN DAS (Shah, J.)
541
A and the circumstances in which they are made are identical, interpretation of one contract cannot be regarded as a guide for determining the intention of parties to another contract.
In Shivnandan Sharmlis case(') the position of a Treasurer
of a Bank fell to be determined somewhat indirectly. Shivnandan
B -a head cashier in one of the branches of the Punjab National
Bank-appointed by the Treasurer who was in charge of the
Cash Department of the Bank under an agreement betw,i!en the
Bank and the Treasurer, was dismissed from the service by the
Bank. In a reference made to the Industrial Tribunal of certain
industrial disputes including one for reinstatement of Shivnandan,
c 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 DepartD ment 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
E 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 allowed to keep with
them.
The Bank was also given power in case of gross negliF gence or misconduct or of any fraud, misappropriation or embezzlement by the Treasurer or any of the nominees in the discharge of their duties to dispense with the services of the Treasurer
forthwith.
The Treasurer was not to engage any person as his
assistant or peon about whose character, conduct or reliability
the manager of the Board of Directors of the Bank may have any
G objection. Shivnandan was a nominee of the Treasurer, but from
t~e terms of his employment it appeared that he was working
directly under the control and supervision of the Punjab National
Bank. This Court held that the Treasurer's relation to the Bank
was that of a servant to the master, and the ministerial staff of
the Cash Department appointed by him were also the employees
H in the Cash Department. It is difficult to regard the agreement
in Shivnandarl Sharmas case(') as even substantially similar to
(I) [1955] I S.C.R. 1427.
542
SUPREME COURT REPORTS
[1966] 2. S.C.R.
the agreement in the present case between the Allahabad Bank A
and the Treasurer, so as to m.ake the interpretation of the agreement a gqide or a precedent in the interpretation of the agreement
before us.
In Piyare Lal Adlshwar Lal's case( 1 ), one Sheel Chandr(l was
appointed Treasurer of the Central Bank for various branches on B
a monthly salary.
Under the agreement between Sheel Chandra
and the" Bank, Sheel Chandra had to engage and employ all subordinate staff. He had the power to control, dismiss and change the
staff at his pleasure, but he could not engage or transfer any member of the staff except with the approval of the Bank and he had to
dismiss any such member if so required by the managing director
C
of the Bank or Agent of the office. The Treasurer was responsible for the acts and omissions of his representatives whom he
was entitled to appoint at the various branches with the approval
of the Bank, and he had agreed to indemnify the Bank against
any loss arising from any neglect or omission on their part. But
the Treasurer and his staff were under the direct control of the D
Bank.
The agreement which was terminable by three calendar
months' notice in writing by either side, could in the event of any
breach of any condition of the agreement by the Treasurer be
terminated by the Bank forthwith. Having regard to the nature
of his work and the control and supervision of the Bank over the
Treasurer, it was held that the Treasurer was a servant of the E
Bank and the emoluments received by the Treasurer were in the
nature of. salary and assessable under s. 7 of the Income-tax Act
and not profits and gains of business under s. 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/al Adishwar Lal's case(') this Court founded
F
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
G
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 cl. (d) he has to transmit from
one place to another place whenever so required, under such guard
H
(I) [1960] 3 S.C.R. 669.
,
c.r.T. v. MANMOHAN DAS (Shah, J.)
543'
A as may be provided by the Bank, all such money, cash, bullion,
securities, cheques, notes, hundies, drafts, orders and other docu-
'
ments, but that does not put the Treasurer under the general supervision of the Bank.
\
•
•
On a careful consideration of the covenants, we are of the
B view that the Treasurer was not a servant of the Allahabad Bank
under the terms of the agreement dated January 2, 1931, and the
n;muneration received by him was not "salaries" within the meaning of s. 7 of the Income-tax Act. But that is not sufficient to
conclude the matter in favour of the assessee.
The benefit of
s. 24(2) of the Indian Income-tax Act may be availed of by the
c assessee only if the loss sought to be set off was snffered under
the head "Profits and gains
.
. in any business, profession
or vocation".
It is difficult to regard the occupation of the
Treasurer under the agreement as a profession, for a profession
involves occupation requiring purely intellectual or manual skill.
and the work of the Treasurer under the contract cannot be so
n regarded.
Occupation of a Treasurer is not one of the recognized professions, nor can it be said that it partakes of the character of a business or trade.
In performing his duties under the
agreement the assessee exercised his skill and judgment in making
proper appointments and made arrangements for supervising th.e
work done by the staff in the Cash Department of the Bank's
E Branches.· The remuneration received by him was for due performance of the duties and also for the guarantee against loss arising to the Bank out of the acts or omissions of the Cash and
other staff of the Bank.
Taking into consideration the nature of the duties performed,
F and the obligations undertaken, together with the right to remuc
neration subject to compensation for loss arising to the Bank from
his own acts and omissions or of the servants introduced by him
into the business of the Bank, the assessee may be regarded as
following a vocation.
The remuneration must therefore be computed under s. 10 of the Income-tax Act and loss of profit suffered
G ia that vocation in any year may be carried forward to the next
year and be set off against the profit of the succeeding year.
The appeal therefore fails and is dismissed with costs.
Appeal dismissed .