1979 Supreme(MP) 627

IN THE HIGH COURT OF MADHYA PRADESH
G. P. Singh C. J. on difference between G. G. Sohani and G. L. Oza JJ.
Sardar Arjunsingh Ahluwalia – Petitioner
Versus
Commissioner Of Income Tax, M. P., Bhopal – Respondent
Misc. Civil Case No. 146 of 1976
Decided On : 04-09-1979

Arrears of salary received by the assessee in the assessment years 1966-67 and 1967-68 could not be held to be income of the assessee which had accrued to him in the assessment years 1946-47 and 1947-48.

Headnote:

INCOME TAX ACT, 1961 - SECTION 15(A), 15(C) - SALARY - ACCRUAL - ARREARS OF SALARY - MEANING OF - WHETHER ARREARS OF SALARY RECEIVED BY THE ASSESSEE IN THE ASSESSMENT YEARS 1966-67 AND 1967-68 COULD BE HELD TO BE INCOME OF THE ASSESSEE WHICH HAD ACCRUED TO HIM IN THE ASSESSMENT YEARS 1946-47 AND 1947-48.

Fact of the Case:

The assessee received a sum of Rs. 10,000 from M/s Kalyanmal Mills Ltd., in the assessment year 1966-67 and Rs. 65,532 in the assessment year 1967-68 in pursuance of a final decree passed by the learned Additional District Judge, Indore, in a suit for accounts instituted by the assessee against M/s Kalyanma Mills Ltd., Indore. The case of the assessee in that suit was that by an agreement dated 2nd January 1946, the assessee, who was employed as a Personal Assistant to the Managing Director of M/s Kalyaumal Mills Ltd, and was carrying on business in the name of M/s A. Ahluwalia & Sons, was appointed, on the terms and conditions mentioned in that agreement, to look after and supervise the waste department of the Mills, that the agreement was to remain in force for a period of five years commencing from 1st January 1946, but the Kalyanmal Mills Ltd., terminated the agreement on 9th November 1948. The assessee was paid by the Mills his salary due to him as the Personal Assistant to the Managing Director of the Mills, but the Mills refused to make any payment to the assessee claimed by him under the agreement dated 2nd January 1946 entered into by the Mills with M/s A. Ahluwalia & Sons, in which name the assessee was carrying on the business. The assessee, therefore, filed a suit in the Court of the Second Additional District Judge, Indore, for rendition of accounts. The suit was resisted by the Mills on a number of grounds, but the trial Court passed a preliminary decree for accounts directing that accounts be taken from 1st January 1946 to 31st December 1950. 0;; an appeal being preferred to the High Court by the Mills, the preliminary decree passed by the trial Court was modified and the Kalyanmal Mills Ltd., was directed to render accounts from 2nd January 1946 to 9th November 1948. In pursuance of the decree passed by the High Court, a Commissioner was appointed by the trial Court to take accounts and, on the basis of the report submitted by the Commissioner, the trial Court passed a final decree on 14th December 1965 decreeing the assesses claim to the extent of Rs. 50,307.43 with costs and interest from the date of the suit i.e. from 30th December 1953 till realisation, at four per cent per annum. It was in pursuance of this final decree dated 14th December 1965 that the assessee received from the Mills Rs. 10,000 from 1st April 1965 to 31st March 1966 and Rs. 65,532 from 1st April 1966 to 31st March 1967.

Finding of the Court:

The Tribunal held that the relationship between the assessee and the Mills, arising out of the agreement dated 2nd January 1946, was that of an employer and an employee. The remuneration received by the assessee from the Mills in the assessment years 1966-67 and 1967-68 in accordance with the final decree would, it was not disputed before us in view of the finding of the Tribunal, amount to receipt of arrears of salary by the assessee paid to him by his former employer. The Tribunal was justified in holding, on the facts and in the circumstances of the case, that the remuneration received by the assessee from the Kalyanmal Mills Ltd., in the assessment years 1966-67 and 1967-68, pursuant to the final decree passed in his favour on 14th December 1965, could not be held to be income of the assessee which had accrued to him in the assessment years 1946-47 and 1947-48.

Issues: 1. Whether on the facts and in the circumstances, the Tribunal is justified in law in holding that the income of the assessee became liable to be assessed in the assessment years 1966-67 and 1967-68 and not in the years 1946-47 and 1947-48 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that as the liability itself was disputed by M/s Kalyanmal Mills, the assessee's right to receive remuneration or commission in the terms of agreement accrued only on the decision the High Court on 14-12-1965 ?

Ratio Decidendi: The Tribunal was justified in holding that the remuneration received by the assessee from the Mills in the assessment years 1966-67 and 1967-68 in accordance with the final decree would, it was not disputed before us in view of the finding of the Tribunal, amount to receipt of arrears of salary by the assessee paid to him by his former employer. The Tribunal was justified in holding, on the facts and in the circumstances of the case, that the remuneration received by the assessee from the Kalyanmal Mills Ltd., in the assessment years 1966-67 and 1967-68, pursuant to the final decree passed in his favour on 14th December 1965, could not be held to be income of the assessee which had accrued to him in the assessment years 1946-47 and 1947-48.

Final Decision: The Tribunal was justified in holding that the remuneration received by the assessee from the Mills in the assessment years 1966-67 and 1967-68 in accordance with the final decree would, it was not disputed before us in view of the finding of the Tribunal, amount to receipt of arrears of salary by the assessee paid to him by his former employer. The Tribunal was justified in holding, on the facts and in the circumstances of the case, that the remuneration received by the assessee from the Kalyanmal Mills Ltd., in the assessment years 1966-67 and 1967-68, pursuant to the final decree passed in his favour on 14th December 1965, could not be held to be income of the assessee which had accrued to him in the assessment years 1946-47 and 1947-48.