1960 Supreme(SC) 137

SUPREME COURT OF INDIA
26th April, 1960
S.K. DAS, J.L. KAPUR AND M. HIDAYATULLAH, JJ.
M/s. Pivare LAL Adishwar Lal, Appellants
Versus
Commissioner of Income-tax Delhi, Respondent.
Civil Appeal No. 123 of 1957.
Advocates Appeared
Mr. A. V. Viswanatha Sastri, Senior Advocate (M/s. S. N. Andley, J. B. Dadachanji, Remeshwar Nath and P. L. Vohra, Advocates of M/s. Rajinder Narain and Co. with him), for Appellants; Mr. C. K. Daphtary, Solicitor-General of India, M/s. R. Ganapathy Iyer and D. Gupta, Advocates, with him), for Respondent.

The emoluments received by a Treasurer of a Bank, who is appointed on a monthly salary and is responsible for the acts and omissions of his staff, are in the nature of salary and assessable as such under S. 7 of the Income-tax Act, and not as profits and gains of business under S. 10 of the Act.

Headnote:

INCOME TAX - Salary of Treasurer of Bank - Whether assessable as part of income of Hindu undivided family or as separate income of Treasurer - Agreement between Bank and Treasurer - Nature of employment - Control and supervision by Bank - Test - Emoluments received by Treasurer - Whether salary or profits and gains of business.

Fact of the Case:

The assessee, a Hindu undivided family, consisted of Sheel Chandra and his younger brother. Their father Adishwar Lal, upto his death on 16-4-1950, was the Treasurer of several branches of the Central Bank of India (which in the judgment will be referred to as the Bank). During his father s lifetime Sheel Chandra was employed as an Overseer in the Bank on a salary of Rs. 400 a month. Sheel Chandra was appointed Treasurer of the Bank at Delhi and sixteen other branches of the Bank. As treasurer he furnished security to the Bank of certain properties of the Hindu undivided family, which consisted of title deeds of immovable properties in Chandni Chowk, Delhi and Government of India securities of the value of Rs. 75,000. The Hindu undivided family owns considerable property, its income from house property alone is Rs. 50,000 per annum and it owns stocks, shares and Government securities also of considerable value. As Treasurer, Sheel Chandra received in the year of account from the Bank a sum of Rs. 23,286 and the question for decision is whether this sum is the individual income of Sheel Chandra as salary or it is part of the income of the Hindu undivided family.

Finding of the Court:

The High Court held that the relationship between Sheel Chandra and the Bank was not one of master and servant but that of an employer and independent contractor and therefore the emoluments receive by Sheel Chandra as Treasurer were not salary but profits and gains of business. As to the second question the High Court was of the opinion that the emoluments were the income of the Hindu undivided family because Sheel Chandra was not appointed Treasurer on account of any personal qualification but he was appointed because (a) his father was a Treasurer of the Bank before him and (b) he had furnished substantial security which was part of the property of the Hindu undivided family.

Issues: 1. Whether in the facts and circumstances of the case and on a true construction of the agreement between the Central Bank of India and Sheel Chandra the salary and other emoluments received by Sheel Chandra as Treasurer of the said Bank are assessable under the head salary or under the head Profits and gains of business ". 2. Whether in the facts and circumstances of the case, Sheel Chandra s emoluments as Treasurer of the Central Bank of India Ltd., were rightly assessed in the hands of the Hindu undivided family of which he is the Karta".

Ratio Decidendi: 1. The nature of the employment of Sheel Chandra has to be gathered from the agreement dated. 19-9-1950, between him and the Bank. It shows that on his application for appointment as a Treasurer at Delhi and sixteen other branches of the Bank, the Bank appointed him Treasurer for those branches and he could, by mutual agreement, be appointed at other branches in the Punjab, U. P. and Rajasthan. The appointment took effect from April 16, 1950. Sheel Chandra undertook to perform the duties and be responsible as Treasurer of the various branches of the Bank and was required to engage and employ subordinate staff called the Cash Department Staff such as Head Cashiers, Cashiers, Potdars, Guaranteed Peons, Godown Keepers, Assistant Godown Keepers, Chowkidars and Clerks and other persons necessary for the efficient working of the said offices. He had the power to "control, dismiss and change" this Staff at his pleasure but he could not engage or transfer any member of the Staff except with the approval of the Bank and had to dismiss any such member if so required by the Managing Director of the Bank or Agent of the Office. 2. The Treasurer and the Cash Department Staff were to do and be responsible for all work in connection with receipts and payments of monies and had to do such other work as was customarily done by cashiers and shroffs of Banks. The Treasurer was also responsible for the correctness and genuineness of all hundies and cheques bearing signatures and endorsements in vernacular and for genuineness of all signatures and writings in any language or character or any securities, voucher deeds, documents and writing which the Treasurer or the Cash Department Staff dealt with and in case of any loss or damage arising out of any forged signatures and endorsements on any document accepted or dealt with by the Cash Department Staff as correct and genuine, the Treasurer was responsible to make good the loss.

Final Decision: The emoluments received by Sheel Chandra were in the nature of salary and therefore assessable under S. 7 of the Income-tax Act and not under S. 10 of the Act as profits and gains of business and the salary was the income of the individual i.e., Sheel Chandra and not the income of the Hindu undivided family.