Law:

Section:

Section 17(3)of the Income-tax Act, 1961 - Salaries - Profit in lieu of salary - Assessment year 1970-71 - Whether, on termination of service of assessee, payment of ex-gratia amount made by employer was totally voluntary and was not compensation which implied some sort of obligation to pay - Held, yes - Whether, therefore, ex-gratia amount received by employee was not profits in lieu of salary within meaning of section 17(3) and, as such, was not taxable as income - Held, yes FACTS The assessee's services were terminated and he was paid three month's salary in lieu of notice. He was also paid certain amount as ex gratia. The assessee claimed exemption in respect of ex gratia amount on the ground that it was a capital receipt. The ITO, however, held that the amount in question was compensation received in connection with the termination of the employment and was, therefore, assessable as salary in terms of section 17(3)(i). On second appeal the Tribunal held that the amount of ex-gratia payment was not includible in total income of the assessee. On reference: HELD This Court in the case of CIT v. Ajit K. Bose [1987] 165 ITR 90 held that the payment made by the employer was ex gratia and totally voluntary and was not compensation which implied some sort of obligation to pay. Therefore, the amount received by the employee was not profits in lieu of salary within the meaning of section 17(3) of the Act and, as such, was not taxable as income. The facts being identical, the said decree governed instant case also. In view of aforesaid, the Tribunal was right in holding that the amount of ex-gratiapayment was not includible in the total income of the assessee. Note: The case has been decided in favour of the assessee. CASES REFERRED TO CIT v. Ajit Kumar Bose [1987] 165 ITR 90 (Cal.) and CIT v. K.K. Roy [1972] 84 ITR 701 (SC) S.K. Mitra for the Applicant. JUDGMENT Ajit Kumar Sengupta, J.-At the instance of the Commissioner of Income-tax, West Bengal-VII, Calcutta, the following question of law has been referred to this court under section 256(1) of the Income-tax Act, 1961, for the assessment year 1970-71: "Whether, on the facts and in the circumstances of the case…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492