Law: Income Tax Act, 1961

Section: 15

(a) Income-tax---Salary---Arrears of salary---Scope of cl. (c) of S.15---Section 15© covers cases where charge could or could not have been imposed---Salary due to assessee in previous years relevant to assessment years 1946-47 and 1947-48--Salary due from mills in Indian State---Indian Income-tax Act not applicable in Indian State in assessment years 1946-47 and 1947-48--­Amounts received in previous year relevant to assessment years 1966-67 and 1967-68---Amounts assessable as arrears of salary under S.15(c)---Indian Income tax Act, 1961, S.15. Section 15 of the Income Tax Act, 1961, must be read harmoniously. Clause (c) applies to arrears of salary provided such arrears had not been charged to income-tax for any earlier previous year. The words used in clause (c) are "if not charged to income-tax and are wide enough to cover cases where the charge could or could not have been imposed. In January, 1946, the late assessee A entered into an agreement in the name of A & Sons with K mills to sell to merchants all kinds of waste cotton of different qualities and quantities produced by the said K mills on the terms and conditions that were contained in the letter of the Managing Director of the mills, dated January 2, 1946. There were disputes between the parties arid the agreement was terminated on November 9, 1948. The amounts due to the assessee not having been paid, he filed a suit and the trial Court passed a preliminary decree for taking accounts. The same was upheld, with minor modifications, by the High Court. Accounts having been taken, a final decree was passed on December 14, 1965. Pursuant thereto, the assessee was paid Rs.10,000 between April 1, 1965, and March 30, 1966, and Rs.65,532 between April 1, 1966, and March 31, 1967. These amounts were brought to tax in the hands of the assessee for the assessment years 1966-67 and 1967-68, respectively. The Income Tax Authorities and the Tribunal held that the relationship between the mills and the assessee was that of master and servant and that the said amounts that had been paid to him were taxable under the head "Salary". The High Court held that the income was assessable in the assessment years…

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