1. This is a departmental appeal challenging the order of the learned Controller (Appeals) excluding the amount of Rs. 1,49,940 from the estate of the deceased. The said amount was received by his legal heirs as compensation on account of the death by accident of the deceased on 25-7-1978. The said compensation was paid in terms of Clause 143 of the agreement between the Great Eastern Shipping Co. Ltd., Bombay and the Maritime Union of India. The said clause reads as follows: 143. Payment of compensation for personal injury resulting in permanent incapacity or death arising out of and in the course of employment, but not being death or injury caused by officer's own wilful act or default or misbehaviour, the Company shall pay a lump sum compensation as under--(a) If the officer is more than 30 years of age 48 months'wages.
on the date of accident causing permanent(b) More than 30 years of age on the date of 42 months'wages, the accident causing permanent incapacity The monthly wages referred to in the aforesaid clause was to be calculated in accordance with Clause 146 which reads as follows: 146. Monthly wages for purposes of calculating compensation payable under Clause 143 above shall be the basic monthly wages applicable to the Officer concerned at the time of the accident.
Clause 173 spelt out the mode of payment of various amounts, including, inter alia, the one referred to in Clause 143 above, in the event of the death of an Officer. The said clause may also be extracted here for ready reference as follows: 173. In the event of death of an officer all amounts payable in accordance with the provisions of this agreement shall be paid to the person or persons who obtain legal representation to the estate of the deceased officer. The company may in its absolute discretion act upon a nomination made by an officer in the prescribed form and pay all such amounts to such person or persons as may be nominated by the officer provided that the nominee or nominees furnish such indemnity as in the opinion of the company will be sufficient to safeguard itself against any claim that may be made in respect of the payment to the nominee or nominees.
The question for determination on the basis of the above clauses of the agreement was whether the compensation of Rs. 1,49,950 received by the legal heirs of the deceased in terms of Clause 143 was includible in his dutiable estate, or whether the said compensation was no part of the estate of the deceased and that it accrued directly to the legal heirs. The finding of the Assistant Controller was that the aforesaid amount was includible in the dutiable estate as the said amount was paid to the deceased in terms of one of the clauses of his service contract. The learned Appellate Controller, has, however, excluded the aforesaid amount from the dutiable estate of the deceased, following the decision of the Andhra Pradesh High Court in the case of Smt.
Lakshmisagar Reddy v. CED  123 ITR 601. While doing so, the observations of the Appellate Controller were, inter alia, as follows : . . . the real question is whether the compensation became payable directly to a particular class of persons or to the estate itself.
In that context, the opinion of the commentator is that a mere power of nomination would not be enough to bring Section 6 of the ED Act into play. In the present case, if we read Section 173 of the Floating Officers service conditions quoted above, we find that the compensation under that agreement is payable to the persons who obtain legal representation of the estate of the deceased. It is also laid down that the company would have absolute discretion to act upon a nomination made by an officer or not to so act. It is further required that such nominees furnish an indemnity to the company. I am, therefore, of the opinion that the amount herein question did not pass on the death of the assessee, but became payable only afterwards, to such person who would obtain the representation of his estate. Thus, it was not also within his disposing capacity . . .
In the event, the learned Appellate Controller deleted the aforesaid addition.
2. The revenue is in appeal against the aforesaid direction of the Appellate Controller and the learned departmental representative stressed before us that, in the present case the amount has not been gratuitously paid to the legal representative of the deceased. It was given in terms of the contract of service and it cannot, therefore, be said that the deceased could not have disposed of the compensation so receivable on his death by making a will or by nominating a person for receipt of the said amount. The discretion of the employer to pay the amount to the legal representatives of the deceased and not to the nominees of the deceased did not mean that the amount in question was not payable by the employer on account of the service terms and conditions of the deceased. It was not left to the discretion of the employer to pay the amount or not. The amount was payable in any case, the only discretion left to the employer was to give it to the nominees of the deceased or to his legal representatives, and as such, the ratio of the decision of the Andhra Pradesh High Court relied on by the learned counsel for the accountable person would have no application to the facts of the present case.
3. We have carefully examined the facts of the case and the rival submissions. A perusal of Clause 143 extracted above, would show that the payment of compensation stipulated therein was not only if the employee died as a result of some injury; it was payable also in case the injury resulted in permanent incapacity to the employee. Further, it was not for any injury on account of which the permanent incapacity or death took place that the compensation was payable, it was payable only if the personal injury resulting in permanent incapacity or death arose 'out of and in the course of employment'. It was, of course, made clear in the clause that no compensation would be paid in case the death or injury was caused by officer's own wilful act or default or misbehaviour. Subject to the above exception, the right to receive compensation for personal injury resulting in permanent incapacity or death arising out of and in the course of employment was a right which was enforceable by the employee as a term of his employment. It is true that no contract was entered into by the individual officer with the company, but it cannot be lost sight of that the agreement had been entered into between the employer in this case and the Maritime Union of India in their representative capacity representing the employees, and as such this agreement was binding on his behalf on the company as it would be in case he himself had entered into an agreement with the said company individually. The payment of compensation stipulated in Clause 143 was not discretionary with the employer company. If the incapacity or death took place on account of an injury caused during the employment of the employee, the compensation had to be given on the basis of the formula worked out in Clause 143 extracted above. Another important point in Clause 143 is the manner in which the compensation is to be computed. The said compensation would be equal to 48 months' wages if the employee was more than 30 years of age on the date of accident, causing permanent incapacity on the date of his death. Clause 146 defined the monthly wages for the above purpose to be the basic monthly wages applicable to the officer concerned at the time of the accident. The aforesaid features of the compensation scheme contained in clauses 143 to 146 of the agreement are peculiar to the facts of the present case. We have to determine in their context whether the deceased employee had any interest in the property in terms of Clause 143 at the time of his death. It has been held by their Lordships of the Hon'ble Delhi High Court in the case of CED v. A.T. Sahani  78 ITR 508, that the right to get compensation as a condition of one's service is as much an interest in property as any other interest which a person may have in incorporeal property, such as choses-in-action, etc. The said ratio, in our opinion, squarely covers the facts of the present case. In the case of Smt. Lakshmisagar Reddy (supra), the finding of their Lordships on the construction of Rule 73 of the Indian Airlines Corporation Employees' Service Rules, was that the amount was not payable automatically, and that the employer had discretion under Rule 73 not to pay the same when the accident was not attributable to the deceased's own negligence, default or breach of instructions. At page 605, their Lordships stressed the point that in Rule 73 the word used was 'may' and not 'shall'. It was also pointed out that there was no ascertained amount fixed in Rule 73 which had to be paid by way of compensation by the Corporation. In the present case, the word used in Rule 143 is not 'may pay' but 'shall pay' and, further the basis of payment has been laid down in the rule itself. It cannot, therefore, be said that under Clause 143 of the agreement, which we are presently considering, anything is left to the will or discretion of the employer to pay or not to pay the compensation in question. At pages 608 and 609, their Lordships highlighted this aspect, while considering the decision of the Delhi High Court in A.T. Sahani's case (supra). The observations of their Lordships, inter alia, were as follows : Therein it was held that the payment of compensation way not gratuitous nor did it depend upon the discretion of the Corporation.
But it is a compulsory payment which the Corporation is bound to make on the happening of a certain event to the heirs of the deceased. Therefore, there is a direct nexus between the right of the deceased as an essential condition of his service to have that compensation paid to his legal representatives and the right of his legal representatives to receive that payment. The right of the deceased in the circumstances was held to be interest in property .
. . But in the present case under Rule 73 the deceased employee was not entitled to any compensation . . .
4. In the present case, as we have noted above, Clause 143 spells out an integrated scheme which takes into account both the situations, namely : (i) of permanent incapacity and (ii) of death and stipulates the same amount of compensation ; to be payable, in the former case, to the employee himself, and, in the latter case to his nominee or his legal representative, as the case may be. This feature was not existing in the case of Smt. Lakshmisagar Reddy (supra). By reading Clause 143, one cannot get the impression that the payment of compensation is not compulsory, and that the employee in question does not have an interest in the right created by Clause 143 during his lifetime, while he was under the employment of the company. The right to receive compensation is directly related with his employment in the service of the company and his being permanently incapacitated or his dyihg on account of an injury received by him in the course of his employment. In this view of the matter, we feel that the decision of the learned Appellate Controller is not correct. The first impression which, we also had, was the same as has been expressed by the learned Controller in his order, but on closer scrutiny of the terms of the contract and the various authorities relied on by either sides, we have come to a conclusion different from what our first impression was. This, however, being an opinion formed on closer scrutiny of the issue, we feel that we must differ from the opinion expressed by the learned Controller, and for the reasons given above, we reverse his order and restore that of the Assistant Controller.