1The question we are called upon to answer in this R.C. is :
"Whether, on the facts and in the circumstances of the case, the sum of Rs. 10,500 paid to the assessee by his employer as an ex gratia payment is liable to be taxed under the head 'Salary' under S.17 of the Income Tax Act ?"

2It has come to be referred to this court in the following circumstances :- V. R. Ganti, the assessee, was an employee of Anglo French Drug Co. (Eastern) Ltd., Bombay, for short ("the employer"). On the ground of ill health he chose to resign the job by tendering his resignation on November 6, 1981. While accepting the resignation, with effect from December 6, 1981, the employer paid to the assessee an amount of Rs. 10,500 (being salary for four months) as ex gratia in addition to the terminal benefits to which he has entitled under law. This amount was assessed to tax under S.17(3)(ii) of the Income Tax Act by the Income Tax Officer, in the order of assessment dated December 16, 1982. Challenging the correctness of the said order of assessment, the assessee went in appeal before the Appellate Assistant Commissioner of Income Tax who, by his order dated April 30, 1984, allowed the appeal holding

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