Law:

Section:

Income-Compensation paid on termination of employment before expiry of term-Whether compensation is in lieu of past services or for loss of employment-Question of law-Reference.   A contract of service as an employee for a fixed period of years contained a provision that if the services of the employee were determined before the termination of the period, the employee would be entitled to compensation calculated at a certain amount "for each unexpired year of the duration of his employ ment". His services were terminated before the expiry of the period and he was paid a sum of Rs. 7 lakhs as "compensation for the cessation of employment". The Income-tax Authorities taxed the amount treating it as compensation in lieu of past services but the Tribunal held that the sum was not paid in lieu of_ past services and was not taxable   Held, that the true nature of the payment received had to be determined on the legal effect of the terms of the agreement of service, the letter terminating the employment and the agreement under which the amount of 7 lakhs was paid, and such determina tion was one on a question of law on which a case should be stated if the assessee applies for a reference. JUDGMENT   SHAH, J.-These are two appeals from certain orders in income-tax proceedings. Civil Appeal No. 457 of 1960 is against the order dated March 26, 1958, of the High Court of Judicature at Bombay refusing to call upon the Income-tax Appellate tribunal to state a case under section 66 (2) of the Indian Income- tax Act. Civil Appeal No. 458 of 1960 is against the order dated August 13, 1956, of the Income-tax Appellate tribunal, deciding an appeal under section 33(4) against the department.   The respondent was an employee of the Dalmia Cement and Paper Marketing Co. Ltd. By an agreement dated October 11, 1943, he was appointed to look after the Bombay Office Organisa tion of the company at a remuneration of Rs. 4,000 per month. The company undertook to pay income-tax and super-tax due and payable on this amount of remuneration at the rate prescribed in the yearly financial Acts, and also to pay conveyance and entertainment allowance as…