JUDGMENT

B. P. JEEVAN REDDY J. : —This appeal is preferred against the judgment and order of the Settlement Commission (Income-tax and Wealth-tax), New Delhi, disposing of the application filed by the appellant with certain directions. The matter pertains to the Assessment Year 1950-51.

2. The appellant, Shriyans Prasad Jain (since deceased) was appointed as the Officerin-Charge of Bombay office of the Dalmia Cement & Paper Marketing Company Limited (DCPM) by an order dated 11-10-1943. His salary was fixed at Rs. 4,000/- per month - free of Income-tax. According to the appellant, the order of appointment further stipulated that the period of employment shall be 25 years and that in case his services are terminated before the expiry of the said period, he shall be paid compensation at the rate of Rs. 40,000/ - per annum for the unexpired period. The revenue, of course, disputes the aforesaid stipulations relating to period of service and the provision for compensation in case of premature termination.

3. Through a letter dated February 14, 1950, the services of the appellant were terminated with effect from November 30, 1949. An amount of Rs. 7 lacs was paid to the appellant on that occasion.

4. In the assessment proceedings relating to Assessment-Year 1950-51, the appellant claimed that the said sum of Rs. 7 lacs received by him was not taxable inasmuch as it represented compensation for loss of employment. He submitted that according to the law as it then stood, the amount paid by way of compensation towards loss of employment was not taxable. The Income-tax Officer did not agree with the submission and included the said amount in his income. On appeal, the Assistant Appellate Commissioner upheld the appellants plea and allowed the appeal, whereupon the Revenue went in appeal to the Tribunal. This appeal was dismissed on 13-8-1956. An application filed by the Revenue under Section 66(1) of the Indian Income-tax Act, 1922 was dismissed by the Tribunal. An application under Section 66(2) was also dismissed by the High Court, whereupon the Revenue approached this Court under Article 136 of the Constitution. This Court directed the Tribunal to refer the following question for the opinion of the High Court under Section 66(2) of the 1922 Act: "whether on the facts and circumstances of the case, the sum of Rs. 7 lacs is liable to tax under Section 7 of the Income-tax Act, 1922."

5. On February 8,1965, the High Court at Bombay answered the reference in favour of the appellant and against the Revenue. It held that the sum of Rs. 7 lacs represented compensation for loss of office and was therefore not taxable. The decision is reported in (1965) 56 ITR 724. Against the order of the Bombay High Court, the Revenue filed a special leave petition in this Court but withdrew it later.

6. On December 11, 1956, the Government of India appointed Justice Vivian Bose, a retired Judge of this Court, as Commission of Inquiry to look into the affairs of certain companies controlled by Dalmia-Jain group. The Commission submitted its report in June, 1962. The Commission found several irregularities and fraudulent transactions by and between the companies controlled by Dalmia-Jain group including the Dalmia Cement & Paper Marketing Company Limited. The Commission also dealt with the aforesaid payment of Rs. 7 lacs to the appellant. The main question considered in this regard was the truth and genuineness of the letter dated October 11, 1943. In other words, the question was whether there was any such letter of appointment prescribing the period of employment as 25 years and also providing for the amount of compensation payable in case of premature termination. The findings of the Commission relevant for the purpose of this appeal are to the following effect :-

"Actually there was no decision about this (about the genuineness of the letter dated 11th October, 1943) on the merits because of a slip at the original stage, the question of its genuineness was shut