Law:

Section:

Section 4 of Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Income - Chargeable as - Assessment year 1953-54 - Assessee A, was promoter and who proprietor of managing director of company and all its shares were held by him and two others - He was entitled to receive in addition to monthly remuneration 1/10th share of surplus profits of company in terms of articles of association - A under an agreement with one G, agreed to transfer all his shares to G and that he would cease to render services to company as mentioned in article of association and would also forgo his right to receive share of profits of company in consideration of payment of Rs. 1 lac - Whether article of association not merely created obligation as part of assessee to serve and to receive remuneration for services rendered but also created a right of lasting and enduring nature in favour of assessee and, therefore, consideration received for releasing such right as condition of sale was capital receipt not taxable in hands of assessee - Held, yes FACTS The assessee was a proprietary concern belonging to one A who was the promoter of a company IP which was started in the year 1936. All the shares of this company were held by A and two others. Since the commencement of the company, A was also appointed as managing director of the company on a monthly salary. In addition to this salary, under article 29 of the Articles of Association of the company, he was paid 1/10th share of surplus profits of the company. During the accounting year 1952 relevant to the assessment year 1953-54 under an agreement it was agreed to between A and one G that in case the latter was able to purchase all the shares of the company, the former would cease to render service to the company as mentioned in article 29 of the articles of association and would forgo his right to receive the share in the profits of the company as mentioned in the said article and in consideration of this the latter would pay him a sum of Rs. 1 lakh. In the assessment of the assessee for the assessment year 1953-54, this sum was taxed by the ITO on the basis that it was a revenue receipt. According to the…

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