# V. D. TALWAR (DEAD) AND AFTER HIM HIS HEIRS v. THE COMMISSIONER OF INCOMETAX, BIHAR '

- **Citation:** [1964] 2 S.C.R. 519
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Bench:** S. K. Das, A. K. SARKAR arid M. HIDAYATULLAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/v-d-talwar-dead-and-after-him-his-heirs-v-the-commissioner-of-incometax-bihar-2943
- **Pages:** 12

## Headnote

lncome-Tax-A&8esament-Aa1e.t3ee's ser?Jices
terminated
in term• of contract-Payment of one year'• •alary in lieu of
notiu-Amount received by a8'e8See, if compensation for ws.e of
employment-Indian Income-tax Act, 1922 (11 of 1922) s. 7.
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
agree~ent 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 company actually
paid Rs. 18,096/l/- which was the amount due as salary for
twelve months after deduction of Income .. tax at the source.
The Income-tax Officer held that the sum of Rs. 25,200/-
was·a revenue receipt of the assessee lial)le to be taxed under
tl1e Indian Income-tax Act and he rejected the claim of the
assessce that the said sum was co1npensation for l(}ss of employment and the tax amounting to Rs. 7,!03/15/- should be refunded to him. The appeal of the a.sessee was accepted by
the Appellate Assistant Commissioner but his decision wa•
reversed by the Income-tax Appellate Tribunal. The question
of law referred by the Tribunal to the High Court was whether
the surh of Rs. 25,200/ .. was revenue incoiue of the assessce or
not. The liigh Court gave the decision
a~ainst the assessee
who r.afne to this Court by special leave.
-
1963
Mareh 26
1963
Y.D. Talu..u
v.
Cmnmissi0111r of
lncom1t·ox, Bihar
520 SUPREME qotJR't REl>OR'tS t19M] vot.
Held that what was paid to the a.sessee was hi> salary in
lieu of notiee and not compensation for loss of employment.
The asscsscc \vas not given any notice for the termination of
his services.
What he was given was his salary for 12 months.
He Rot exactly what he was entitled to get under the terms
of his employment.
He was not deprived of any rights under
his service contract. The payment made to him could not be
called compensation for lo&• of office and he was liable to be
taxed under s. 7 of the Act.
Henry (II. M. ln,,pector of Tax"6) v. Arthur Fa.ter and
lltnry (ll. 111. lnsptclor of TaxM) v .. la.eph FtM/er (1932) 16
T. C.
605, Tlte Commissioner
of
Income-tax,
Bombay
-
City I,
llomba!I
v.
B.
D.
Sheppard, Bombay.
(1964]
I S. C. R. 163, Henley v.
Murray (H. M. lmptelar of
Taus) (1950) 31 T. C. 351, Dale (JI. M. lnsper,torofTaX«) v.
de Soi.Mon.•, (1950), 32 T. C. 118, and DuJJ(H. M. Inspector
of Taxes) v. Harlow, (1941) 23 T. C. 633, referred to.
C1nL APPELLA'fil JuttISDICTION : Civil Appeal
No. ()73 of 1962.
Appeal by special leave from the judgment
and decree d;1ted November 22, l!)()O, of the Patna
High Court in Misc. .Judicial Case No. 740 of 1958.
A. V. Viswanatha Sastri and .lf. 8. Nara8imhan, for the appellants.
Gopal Singh and R. .V.
Sachthey, for the
respondent.
J 963. March 26. The Judgment of the Court
was delivered by
Das 1.
S. K. DAB J.-V. D. Talwar, who was assosee
before the taxing authorities and whose legal representatives on his death arc appellants before us, was
employed as the General Manager ofMessrsJ. K,
Iron and Steel Company Ltd., Kanpur. The terms
of his employment as agreed upon by the assessee
and the Company were incorporated in an appointment. letter dated
February 7, 1946. A formal
memorandum of agreement was
also
executed
2 S.C.R.
SUPREME dOUR T REPORTS
521
between the parties on February 9,
1946. The
assessee actually joined the service of the company
on May l, 1946.
According

## Text

...
2 S.d.R .. SUPRENIE COURT R£PORTS
519
V. D. TALWAR (DEAD) AND AFTER
HIM HIS HEIRS
v.
THE COMMISSIONER OF INCOMETAX, BIHAR
'
(S. K. DAS, A. K. SARKAR arid
M. HIDAYATULLAH, JJ.)
lncome-Tax-A&8esament-Aa1e.t3ee's ser?Jices
terminated
in term• of contract-Payment of one year'• •alary in lieu of
notiu-Amount received by a8'e8See, if compensation for ws.e of
employment-Indian Income-tax Act, 1922 (11 of 1922) s. 7.
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
agree~ent 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 company actually
paid Rs. 18,096/l/- which was the amount due as salary for
twelve months after deduction of Income .. tax at the source.
The Income-tax Officer held that the sum of Rs. 25,200/-
was·a revenue receipt of the assessee lial)le to be taxed under
tl1e Indian Income-tax Act and he rejected the claim of the
assessce that the said sum was co1npensation for l(}ss of employment and the tax amounting to Rs. 7,!03/15/- should be refunded to him. The appeal of the a.sessee was accepted by
the Appellate Assistant Commissioner but his decision wa•
reversed by the Income-tax Appellate Tribunal. The question
of law referred by the Tribunal to the High Court was whether
the surh of Rs. 25,200/ .. was revenue incoiue of the assessce or
not. The liigh Court gave the decision
a~ainst the assessee
who r.afne to this Court by special leave.
-
1963
Mareh 26
1963
Y.D. Talu..u
v.
Cmnmissi0111r of
lncom1t·ox, Bihar
520 SUPREME qotJR't REl>OR'tS t19M] vot.
Held that what was paid to the a.sessee was hi> salary in
lieu of notiee and not compensation for loss of employment.
The asscsscc \vas not given any notice for the termination of
his services.
What he was given was his salary for 12 months.
He Rot exactly what he was entitled to get under the terms
of his employment.
He was not deprived of any rights under
his service contract. The payment made to him could not be
called compensation for lo&• of office and he was liable to be
taxed under s. 7 of the Act.
Henry (II. M. ln,,pector of Tax"6) v. Arthur Fa.ter and
lltnry (ll. 111. lnsptclor of TaxM) v .. la.eph FtM/er (1932) 16
T. C.
605, Tlte Commissioner
of
Income-tax,
Bombay
-
City I,
llomba!I
v.
B.
D.
Sheppard, Bombay.
(1964]
I S. C. R. 163, Henley v.
Murray (H. M. lmptelar of
Taus) (1950) 31 T. C. 351, Dale (JI. M. lnsper,torofTaX«) v.
de Soi.Mon.•, (1950), 32 T. C. 118, and DuJJ(H. M. Inspector
of Taxes) v. Harlow, (1941) 23 T. C. 633, referred to.
C1nL APPELLA'fil JuttISDICTION : Civil Appeal
No. ()73 of 1962.
Appeal by special leave from the judgment
and decree d;1ted November 22, l!)()O, of the Patna
High Court in Misc. .Judicial Case No. 740 of 1958.
A. V. Viswanatha Sastri and .lf. 8. Nara8imhan, for the appellants.
Gopal Singh and R. .V.
Sachthey, for the
respondent.
J 963. March 26. The Judgment of the Court
was delivered by
Das 1.
S. K. DAB J.-V. D. Talwar, who was assosee
before the taxing authorities and whose legal representatives on his death arc appellants before us, was
employed as the General Manager ofMessrsJ. K,
Iron and Steel Company Ltd., Kanpur. The terms
of his employment as agreed upon by the assessee
and the Company were incorporated in an appointment. letter dated
February 7, 1946. A formal
memorandum of agreement was
also
executed
2 S.C.R.
SUPREME dOUR T REPORTS
521
between the parties on February 9,
1946. The
assessee actually joined the service of the company
on May l, 1946.
According to the service agreement the pay of the assessee wa' fixed at Rs. 2,000/-
per month with an
increment of Rs. 100/- p.a.
subject to certain deductions for income-tax, absence
of duty etc., which need not be set out in detail for
the purpose of this case.
According to the agreement the period of service was for five years.
Clauses (5) and (6) of the appointment _letter read-
"(5) Period of agreement of service to be five
years.
(6) Termination of service if within five years
to be on notice of twelve months on either
side or salary in lieu thereof."
Clause (1) of the memorandum of the agreement
dated February 9, 1946 said that the employee shall
serve the employer faithfully and diligently for a
term of five years from the date he joins, and cl. 21
read as follows :
"If during the currency of this agreement, the
employee desires to leave the services of the
employers for any reasons whatsoever, he shall
be at liberty to terminate the agreement by
giving twelve
calendar months' notice in
writing only after repaying to the employer
joining money and all expenses if they have
been allowed to the employee, and the employers shall have full power to take all necessary steps in order to enforce such payment.
The employers may
terminate the service
of the employee by giving twelve calendar
months' notice in writing or (in the case of
breach of any of the terms or conditions
contained herein at any time without any
notice) or paying any salary in lieu thereof."
1963
V. D. Talwar
v.
Commissioner of
lncome·tax, Bihar
Das J.
1963
V. D. ·1 o/u·ar
v.
C!J"tl111iuiont1 nf
lncM11t tax, IJihrJr
/)aJ J
522 SUPREME COURT REPORTS [1964) VOL.
We have stated earlier that the asscssce joined
his post as General Manager on Ivlay I, I\)46.
The
sci vices of the assessee were however terminated with
effect from August al, Hl·l7.
It is tile admitted case
of the parties that the services of the assessec were
not terminated for anv default or misconduct on
the part of the assessce, but the services were
terminated because the company did not want to
continue the assessee in their employment. It is
also the admitted case that no
notice of twelve
months for the termination of the service was given
by the company to the asscssee as required by the
contract. In lieu of the notice the company paid to
the
asscssee
on
September 12, lfl47 a sum of
Rs. 18,0!l6/1/0 which
was
the amount computed
as salarv for twelve months after deduction of incometax at' the source.
The company calcul;ttcd
the
salary for the
twelve months at Rs. 21),200/- and
deducted therefrom the sum of Rs. 7,JOil/lil/O as
income-tax. The assessee ga\·e a stamped receipt to
the company for having recicved Rs. 18,0!Hifl /0
"in full and final settlement of all his claims and
dues against th<: employer company."
In making the assessment for the year I !l481949 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 Incowe·tax Act,
l!J22 and rejected the claim of the assessee that the
said sum was compensation for loss of employment
and the tax amounting to Rs. i,103/lii/O should
be refundro to him.
The assessee took an appeal
to the Appellate Assistant Commissioner who held
that the sum of Rs. 25,200/-, though calculated on
the basis of twelve times his monthly salary. was
nothing but compensation for the loss of service and
was therefore not taxable as income in the shape of
salariesThen there was an appeal to the Jncometax Appellate Tribunal which reversed 1he finding
of the Appellate Assistant Commissioner and held
2 $.C.R..
SUPREME COURT REPORTS
523
that the amount of Rs. 25,200/- paid to the assessee
was really salary in lieu of twelve months' notice
and, therefore, the amount was liable to be taxed
under the Indian Income tax Act,
1922.
Under
s. 66(1) of the Indian Income-tax Act, the Incometax Appellate Tribunal referred the following question of law for the opinion of the High Court
"Whether the sum of Rs. 25,200/-
received
by the assessee during the previous year was
the revenue income of the assessee liable to tax
under the Income-tax Act?"
By its judgment and order dated November 22,
1960 the High Court answered the question against
the as,essee.
The assessee then obtained special
leave
from this court in pursuance whereof the
present appeal has been brought to this court.
The short question before us is, whether the
sum of Rs. 25,200/- received by the assessee in the
circumstances stated above was a revenue income
liable to tax under the Indian Income-tax Act or a
capital receipt not liable to tax under the said Act ?
We think that the view taken by the High
Court is correct.
In Henry (H. Jl1.
Inspector of
Taxes) v. Arthur Foster and Henry (H. M. Inspector
of Taxes) v. Joseph Foster (1), Romer, L. ]. said
"'Compensation for loss of office' is a well-known
term and it means a payment to holder of an office
as compensation for being deprived of profits to
which as between himself and his employer he would,
but for an act of deprivation by his employer or
some third party such as the Legislature, have been
entitled." This court accepted the same meaning
in The Commissioner of Income-tax Bombay City I,
Bombay v. E. D. Sheppard, Bombay ('), and said that
the emphasis was on the act of deprivation which
may or may not give rise to any liability at law.
Now, in the present case it is quite clear that the
(I) (1932) 16 T.C. 605,
(2) [1964) l s.c.R, 163.
1953
V. V. Talwa1
v.
Commissioner of
Income·tax, Bihar
Das J.
1963
V. [J Ta/war
v
Cnu:mi.'l·ontr •f
ln.O'IU ta.t, lJihar
Vos J.
524 SUPREME COUkT REPORTS [1964] vot.
two terms in els. (5) and (6) of the appointment
letter and els. I and 21 of the memorandum of
agrrrment must be read together and so read the
true position that emerges is that the contract of
service provided that V. D. Talwar could serve
either for five years at a monthly salary mentioned
. therein or, if the company so elected, for a shorter
period upon the terms mentioned in cl. 21. If the
terms of cl. 21 were complied with, then it could
not be said that V. D. Talwar had surrendered any
rights under the contract or had been depri vcd of
any such rights. The Court of Appeal dealt with the
aforesaid two cases Henry (If. 111. Inspector of Taxes)
v. Arthur Poster ('), and Henry (II. M. Inspector of
'l'a:i;es) v. Joseph Foster(') along with a third case,
Hunter (II. JI. lnpector of Ta.us) v. Dewhmst (').
It came to the same conclusion in all the three cases,
though the facts were a little different in the third
case where the respondent desired to
retire from
active management of the company but his codirectors wished to be able still to consult him and
it was agreed that he should resign the ollice of
Chairman, receive as "compensation" a lump sum
in lieu of the provision under article I 09, waiving
any future claim under that article and remain on
the Board of the company at a reduced rate of remu·
neration. The decision in this third case was taken
to the House of Lords.
Lord Dunedin pointed out
that assuming that the view of the Court of Appeal
in the Foster casee was right on consideration of how
the question stood upon the sole consideration of the
rights arising under article I 0(1, a different question
arose in the case of Dewhurst; because Dewhurst was
not paid in terms of article I 09 but entered into a
new bargain in
pursuance of which he was paid
£ I0,1100 in consideration, not of ceasing to be a
director, for he did not cease, but of giving up his
potential cl_aims under art.ic!e 109.
His . Lords!1ip
said that tlm payment for givmg up potential claims
under article 109 was not income. This was a feature
(t) (1932) 16 T.C. 605,
2 S.C.R.
SUPREl\Ul COURT REPORTS . 525
which distinguished Hunter (H.M. Inspector of Taxes)
v. Dewhurst (1), from the two Foster cases (Supra)
and it brought into relief the distinction between the
two classes of cases, one in which there is deprivation
of rights under the agreement and this would fall
under compensation and the other in which there is
no
such
deprivation.
Perhaps
Sir
Raymond
Evershed, M. R. (as he then was) had this distinction
in mind when in Henley v. },furry (H. M. Inspector of
Taxes ('), he said that there were two kinds of cases
which fell for consideration under this head : one in
which the right of one party to call upon the other
for performance of the terms of agreement may be
modified or indeed wholly given up, still the corresponding right to acquire payment ei~er of the whole
sum or iome less figure is preserved and is still payable under the contract and the other is where the
contract itself goes altogether and some sum becomes
payable for the consideration of the total abandonment
of all the contractual rights which the other party had
under the contract. In one class of cases the con·
tract persists and the amount is payable under the
contract and in the other class of cases there is total
abandonment of all the contractual rights and what is
paid is in consideration of that abandonment. The
present case in our opinion comes under the first of
these two classes.
Now, the High Court has rightly pointed out
that the principle which will apply in a case like this
is that laid down in Dale (H. M. Inspector of Taxes)
v. de Soissons (').
There the respondent was em·
ployed as assistant to the managing director of a
company, his remuneration consisting of a fixed
salary of£ 3,000 per annum and a commission cal·
culated on profits.
Under the terms of his service
agreement, the respondent's appointment was to be
for three years from January l, 1945 but the company
was entitled to terminate the agreement at Decem·
her 31, 1945 or December 31, 1946 on payment
(1) (1932) 16 T,C. 605.
(2) (1950) 31 T.C. 351.
(3) {lg50) 32 1'.C, llij.
/96J
V. D. Talwar
v.
Commissioner of
Incom1-tax, Bihar
Da1 J.
1963
V, D- -rol:iar
..
Commi.SJior1tr OJ
1'1cmnt·tax, Bihar
Das J.
526
SUPREME COURT REPORTS [1964]VOL.
o_f £ · J0,00() or £ G.000
re~pcctively, as compensation for
loss of office.
1 he company terminated
the agreement at December 31, l!J45 and
paid
£ 10,000 to the respondent.
It was held that the
Payment was not compensation for loss of office.
Roxburgh, .J. who dealt with the case in the first
instance pointed out that the agreement of service
must be rcacl as a whole and so read the agreement
provided that the respondent's employment was to
be
for t;iree
more years unless curtailed under
clause •1 or clause ii and that he was to receive as
a profit for his employment thr payments provided
by the agreement including tlic payment provided by
clause fl; therefore the respondent had never
any
right to be emplPyed for three more years and had no
legal claim which would justify compensation.
He
then said that the respondent surrendered no rights
under the agreement ancl got excatly what he was
entitled to get under his contract of employment.
Herc the position j, exactly the same. It is true that
under one of the clauses of the agreement of service
V. D. Talwar was to serve for five years; but under
another term of the same agreement it was provided
that the employer
might terminate the service of
V. D. Talwar by giving twelve calender months'
notice in writing or paying any salary in lieu
thereof.
The expres<ion "any salary" must be
construed
in
the context
of
the appointment
letter which
said
that if Mr. V. D.
'falwar's
service was to be terminated within five ,·ears he
would be entitled to a notice of twelve months or
salary in lieu thereof. ~o notice for the termination
of service was given to him in the present t:ase, but
he was given twelve months' salary.
He therefore
got exactly what he wa~ entitled to under the terms
of his employment ancl he was not deprived of any
ricrbts under the contract of servicr. There being no
"
deprivation of his rights under the contract, the
\laymcnt cannot be said to be "compensation for
;. .
~· S.C.R.
SUPREME COURT REPORTS
527
loss of office" within the meaning of that expression.
Jenkins, L.J. observed in Henley v. ~Murray (1).
"As the many cases on the topic show,
it is often very difficult to determine the
character of a payment made to the holder of
an office when his
tenure
of the office
is determined
or the terms on which he
holds it are altered, and the question in each
case is, whether, on the facts of the case, the
lump sum paid is in the nature of remuneration
or profits in respect of the office or is in the
nature of a sum paid in consideration of the
surrend<ir by the recipient of his rights in
respect of the office."
In the present case, if V. D. Talwar had been
served with a notice for the termination of his service
he would have worked for twelve months and got
his salary and thereafter his service would have come
to an end.
Instead of giving him a notice the
company paid him twelve months' salary in lieu
thereof.
The true position is that he received twelve
months' salary in respect of his office though he did
not do any work for that period.
By no stretch of
imagination can it be said that the sum paid to him
was in consideration of the surrender by the recipient
of his rights in respect of the office.
It is worthy
of note here that in Henley v. Murray (1), their
Lordships came to the conclusion that what was paid
to the appellant in that case was paid in consideration
of his surrendering his right to serve on and be
remunerated down to the end of his contractual
engagement, for in that case the appellant had the
right to continue in service till M•arch 31, 1944 and
his service was terminable by three months' notice
only after that date.
He however resigned at the
request of the Bord of Directors on an earlier date,
namely, September 2, 1943. Therefore, the principle
.laid down in Henley v. Murray (1), is not the
pririciple which is applicable in the present case,
(I) (19~0) .31 T. C. 351
1963
V. D. Talwar
v.
Commission1r of
lncom1-tax, Bihor
Das J.
1963
JI. D. Ta/war
v.
Commission1r of
/ncomt-lax, Bihar
Das J,
528 SUPREME COURT REPORTS [1964) VOL.
Learned counsel for the appellant has then relied
on Duff (H. M. Inspector of '.'l'a.res) v. Barlow(').
That was also a case where the
parties agreed
that the arrangement arrived at between them should
subsist up to I !J45 though no exact percentage of the
remuneration payable was fixed.
The arrangement
however was brought to an end prematurely in
November I !l37 and in consideration of his premature
termination some remuneration was paid for services
up to November, l!l37 and a sum of £4,000 was paid
as compensation for the loss of the employee's right
to future remuneration under the: earlier agreement
of 1935. In these circumstances it was held that
the sum of £4,000 was received by the respondent of
that case not under the contract of employment nor
as remuneration for services rendered or to be rendered
but as compensation for giving up a right to remuneration. \Ve arc unable to see how that decision
is of any help to the appellant in the present case.
It seems clear to us that in the present case the
appellant
has surrendered no rights under the
contract ; what has been paid to him has b~en paid
under the terms of contract and as salary which
he would have earned if twelve months' notice had
been given to him.
As no notice was given he was
treated as though he was in service and entitled to
salary for twelve months and that was what was
paid to him. It is difficult to see how such payment
can be treated as compensation for loss of office.
The present case is similar to the two cases of
Henry v. Arthur Foster and llenry v. Joseph Fo~ter (')
and different from the case of liunter v. Dewhurst ('!·
In the first two cases the respondents were directors of a limited company.
They had no written
contracts
of
services with the
company but
Article IO!J of the company's articles provided that
in the event of any director who held office for not
less than five years, dying or resignini: or ceasing to
hold office for any cause other than misconduct,
(I) (1941) 2S T.C. 63>.
t2J (1932) 16 T.C. 60~.
~i
•
•.
2 S.C.R.
SUPREME cotJ.R T REPORTS
529
bankruptcy, lunacy or incompetence, the company
should pay to him or his representatives by way of
compensation for loss of office a sum equal to the
total remuneration received by him in the preceding
five years. The respondents resigned office as director in these two cases and received from the company
as "compensation" a payment calculated in accordance with Article 109. It was held by the Court
of Appeal that the payment constituted a profit of
the office of Director and was properly assessable to
income-tax.
Lord
Hanworth, M. R. said
at
page 629:
"Now it is argued that those sums which
became payable under the terms recorded in
article l 09 were compensation for the loss of
office.
Is that the substance of the matter ?
When a man has died he is not compensated
for the loss of his life ; if he resigns voluntarily,
why should he be paid compensation for the
loss of his office? It would seem as if those words
were put in in view of the possibility thereunder of escaping the charge to tax ; but, as I
have said, we have got to look at the substance
of the matter, and the substance of this payment is this : It is contemplated as a part of
the remuneration of the Director payable to
him, and estimated accordimg to his service
during a certain time, and in addition to the
amount paid to him under clause 104, there
shall be estimated a sum which is to fall to be
paid to him under clause 109."
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
1963
V. D Talwar
v.
Commissioner of
Inoome·tax, Bihar
Dos J.
•
•
V.D. Ta/war
•.
CmnmiJJiomr of
/nC#fllt•tax, Bihaf
Das J.
530 SUPREME COURT REPORTS [1964] VOL.
part of his remuneration for his services at 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 by way or
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. i of the Indian Income-tax Act, 1922. It
is not
compensation for loss of employment within
the meaning of Explanation 2 thereto.
For the rea~ons given above we think that the
High Court correctly answered the question.
The
appeal fails and is dismissed with costs.
Appeal diami88ed.
..