Judgment

S. K. Das, J. : This is an appeal on a certificate of fitness granted by the High Court of Bombay under S. 66-A(2) of the Indian Income-tax Act, 1922.

2. The relevant facts lie within a narrow compass. The Commissioner of Income-tax Bombay is the appellant before us and the assessee, E. D. Sheppard, is the respondent. Killick Nixon and Company was a partnership concern carrying on business on a fairly large scale in India. It owned various mills and managing agencies of a number of limited companies. This partnership firm used to employ officer-assistants, mostly Europeans, on the basis of a contract for three years; if the services of the assistants so employed were found satisfactory, extensions were invariably given after every three years on increased salary. Subject to their work being satisfactory, the assistants so employed expected to become partners of the firm one day. The assessee was one of such assistants who joined the firm in 1930. The original contract relating to the assessee s employment was not placed on record. What was placed on record as a specimen copy of the initial agreement, was the contract with one W. J. Heygate. It was undisputed that the terms of employment regarding the assessee were the same as those of the contract with W. J. Heygate. Clause 10 of the said agreement provided that notwithstanding anything contained in it, the firm might terminate the agreement without assigning any reasons after giving the assessee one calendar month s previous notice of its intention so to do. The assessee continued in the employment of the firm and his contract of service was renewed from time to time. On November l, 1947, was made the last renewal. The terms of this last renewal were the same as those of J.G. Miline, a copy of whose renewed contract was placed on record. This renewal provided for a contract of service from November 1, 1947, to October 31, 1950. Under this contract the assessee was to receive a salary of Rs. 1,200/- per month plus a commission of 2-l/2 percent on the net profits of the partnership. The Appellate Tribunal found that if the partnership had continued to do business, the assessee would have got approximately Rs. 50,000/- per annum. Sometime about the last quarter of the year 1947 the firm decided to reorganize its business and with that end in view two limited companies were floated, one was called the Kollick Industries Ltd., which was a public limited company, and the other was called Killick Nixon and Company which was a private limited company. This private limited company was to take over the business previously carried on by the partnership. This arrangement necessitated the termination of the services of the firm s employees and the assessee received a notice from the firm dated December 29, 1947. This notice stated that in view of the changes proposed, the assessee s employment with the firm would terminate as from January 31, 1948. The assessee was then about 38, years old. There were in all sixteen officers including the assessee who were employed with the firm on "contract terms? . With the exception of one all these sixteen officers were Europeans. The three years contracts expired on different dates depending upon the original date of employment in respect of these sixteen officers. So far as the assessee was concerned, it appears that the new company styled Killick Industries Ltd., agreed to take over the services of the assessee on new terms under which his salary was increased but the commission was disallowed, but be was left in more or less the same position financially. The assessee entered the employment of Killick Industries Ltd. on these new terms on February l, 1948. Killick Nixon and Company transferred their assets to the new Company and received shares of the new companies in lieu thereof a large number of shares of Killick Industries Ltd. were put on the Indian market. The shares were of the face value of Rs. 100/- only but were quoted in the mar