The amount payable under a judgment-debt is not salary and the employer cannot deduct at source tax payable by the employee.

Judgment

SHAH, J. : Ramchandra Dhondo Datar-hereinafter after referred to as the respondent-was employed by the appellant company in its publications branch. By agreement dated March 23, 1943, the appellant company agreed to pay to the respondent as from April 1, 1943, remuneration per annum equal to 3 1/2% of the gross sales or Rs. 12,000 whichever was greater. The agreement was to remain in operation for ten years from April 1, 1943, in the first instance and was renewable at the option of the respondent for such period as he desired. By notice dated April 19, 1948, served on the respondent on April 22, 1948, the appellant company terminated the employment of the respondent. The respondent then filed a civil suit in the court of the Fifth Additional District Judge, Nagpur for a decree for Rs. 1,30,000 being the amount of compensation for wrongful termination of employment, arrears of salary and interest. On July 17, 1953, the court after giving credit for the amount received by the respondent passed a decree for Rs. 43,359 (which was inclusive of Rs. 36,000 as compensation for termination of employment and Rs. 6,000 as salary in lieu of six months notice and interest) and costs and interest on judgment. The respondent then applied for execution of the decree and claimed Rs. 54,893-12-0 less Rs. 18,501-10-0 decreed against him in a cross suit filed by the appellant company. The Income Tax Officer, Nagpur, served a notice under S. 46 of the Indian Income-tax Act upon the respondent and also gave intimation to the District Judge, Nagpur, that the appellant company be permitted to deduct at source and to pay into the Government Treasury Rs. 15,956-13-0 as income-tax, surcharge and super-tax due on the sum of Rs. 50,972-2-0 awarded to the respondent. The appellant company also applied that the executing court do declare that the appellant company was entitled and in law bound to deduct the tax due on the amount. The learned Judge directed the appellant company to pay to the Income-tax Department Rs. 15,956-13-0 on account of income-tax and super-tax on the amount due to the respondent and directed it to pay the balance in court after filing a receipt for payment of tax from the Income-tax department. In appeal to the High Court of Judicature at Nagpur, the order passed by the District Judge was reversed and execution as claimed by the respondent was directed.

2. The appellant company contends that under S. 18(2) of the Income-tax Act, it was bound to deduct the tax computed at the appropriate rate on the salary payable to the respondent as the amount due under the decree represented salary. Section 18 sub-sec. (2) of the Income-tax Act in so far as it is material provides that any person paying any amount chargeable under the head "salaries" shall at the time of payment deduct income-tax and super-tax at the rate representing the average of the rates applicable to the estimated total income of the assessee under the head "salary". Sub-section (7) declares that a person failing to deduct the taxes required by the section shall be deemed to be an assessee in default in respect of such tax. The Legislature has, it is manifest, imposed upon the employer the duty to deduct tax at the appropriate rate on salary payable to the employee and if he fails to do so, the tax not deducted may be recovered from him. But the liability to deduct arises in law, if the amount is due and payable as salary. In this case, there has been no assessment of tax due by the Income-tax Officer on the amount payable to the respondent. Under section 46(5), any person paying salary to an assessee may be required by the Income-tax Officer to deduct arrears of tax due from the latter and the employer is bound to comply with such a requisition and to pay the amount deducted to the credit of the Government. But this order can only be passed if income-tax has been assessed and has remained unpaid. It is undisputed that at the material time, no tax was assessed agains