Law: Income Tax Act, 1961

Section: 15

Income-tax--Salary---Death of assessee---Salary due from employer---Agreement for payment of monthly remuneration or share of profits whichever was higher--­Amount received assessed as salary in prior years---Death of assessee during previous year---Share of profits paid to legal heir of deceased---Assessable as salary---Indian Income Tax Act, 1961, S.15. Under the provisions of section 15 of the Income Tax Act, 1961, salary which is due from an employer in the previous year, whether paid or not, is chargeable to income-tax. P was an employee of a company. There was no agreement in writing between P and the employer, but it was an accepted position that remuneration was to be paid to P by the employer at Rs.150 per month or a share of 3 annas 9 piasa in a rupee in the profits of the jewellery department, whichever was higher. The accounts of the employer were closed each year on June 30. It was then that the profits were ascertained and the share in the profits was paid to P. P was assessed from year to year in respect of his remuneration under the head "Salary". P died in January 1961. The employer worked out its profit in the jewellery department for the accounting year ending on June 30, 1961, and determined the remuneration payable to P on a pro rata basis for the period July 1, 196(1 to January 9, 1961. This share in the profits was credited to the account of P. The amount so credited to the account of P on June 30,1961, was Rs.6,75,244. The legal heir of P claimed that this amount was not taxable as the salary of P. The Tribunal upheld the claim of the assessee. On a reference: Held: that the right to receive a pro rata share in the profits had accrued to the deceased at the time of his death, although the amount was computed after the death of P. The right to receive salary accrued to the deceased from month to month. The sum of Rs.6,75,244 which was by­way , of salary for the period July I, 1960, to January 9, 1961, had accrued to the deceased at the time when he died and was assessable as such. Cotton Agents Ltd. V. CIT (1960) 40 ITR 135 (SC); Menaben V. Parikh (Mrs.) v. CED (1979) 116 ITR 840 (Bom). Sassoon (E.D.) and Co. Ltd. v. CIT (1954) 26 ITR 27…

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