1. I find it convenient to dispose of these two appeals of the assessee, for assessment years 1987-88 and 1988-89, by this consolidated order. Rival contentions have been heard and records perused.
2. The relevant facts, in this case, are that the assessee being a Commerce Graduate, was appointed in February 1969, by M/s. Graham Firth Steel Products India Ltd., as an Executive-in-charge of accounts on a monthly salary of Rs. 925. At the time of his appointment, the company had a turnover of Rs. 13.00 lakhs only. On joining the said company, the assessee prepared a cost audit report which was forwarded by the employer to its foreign collaborator in U.K., who appreciated the same immensely. The assessee's suggestion for cutting the cost yielded handsome dividends to the company and in appreciation thereof the assessee was promoted to the post of Commercial Manager in 1973. He was also made incharge of negotiating loans on behalf of the company. After some years, he was elevated to the post of Company Secretary. In that capacity he was instrumental in implementing expansion programmes of the company. He was soon promoted as Financial Controller. The turnover of the company had reached to Rs. 13.00 crores when the assessee resigned from the company as against Rs. 13.00 lakhs when he had jointed it. His salary at the time of his resignation was Rs. 7,000 per month. The company decided to pay a sum of Rs. 1.00 lakh to the assessee in addition to the other remuneration as was due to him. The sum of Rs. 1.00 lakh was paid in two instalments of Rs. 50,000. One was paid in October 1986 and another in April 1987. The assessee filed a return of income for assessment year 1987-88, declaring the amount of Rs. 50,000 received from the employer, as exempt. The return was processed under section 143(1)(a). A notice under section 154 had been issued to the assessee on the ground that non-inclusion of Rs. 50,000 in the adjustment was a mistake. However, this notice was withdrawn when the assessee objected to the same. Thereafter proceedings were taken under section 143(2) by issue of a notice and the assessee was given an opportunity to explain as to why the sum of Rs. 50,000 received from the employer be not assessed to tax as part of salary.
The assessee had claimed that the amount was received as an award for his merit and personal qualities and not as part of remuneration. In this connection, a letter, purported to have been issued under the signature of Dr. Pranlal Patel, Chairman & Managing Director of M/s.
Graham Firth Steel Products India Ltd., dated 29th October 1986, had also been furnished, which certifies that the amount had been paid in consideration of good qualities and good personal character of the assessee. The Assessing Officer, however, rejected the claim of the assessee and included a sum of Rs. 50,000 for assessment year 1987-88.
3. For assessment year 1988-89, the Assessing Officer included the remaining sum of Rs. 50,000 received in April 1987 as income of the assessee.
4. The assessee appealed to the Commissioner of Income-tax (Appeals) for both the assessment years claiming that the assessee had received a voluntary payment of Rs. 1.00 lakh from the employer unconnected with his services and the same was therefore not liable to tax. The CIT(A) has elaborately discussed the issue in assessment year 1987-88 and held that the amount had been received by the assessee for his services.
5. The learned counsel for the assessee contended that the revenue was not justified in assessing the sum of Rs. 1.00 lakh as salary, as the letter placed at Page 19 of the Paper Book issued by the Chairman & Managing Director of the employer company establish beyond doubt that the payment had been made to the assessee in consideration of good qualities and good personal character. It was further contended that in these circumstances the revenue was not justified in taking the view that the amount received by the assessee was part of salary.
6. Reliance was placed on several decisions filed before me by way of a note. These decisions are as under :- (6) C. P. Chitrarasu v. CIT  160 ITR 534/26 Taxman 178 (Mad.) and (7) CIT v. M. Balamuralikrishna  171 ITR 447/37 Taxman 286 (Mad.) The learned counsel for the assessee accordingly contended that the appeals of the assessee may be allowed.
7. The learned Departmental Representative, on the other hand, invited my attention to the decision of the CIT(A) where the issue has been dealt with with reference to the case law and conclusion arrived at that the amount received by the assessee was nothing but part of the salary.
8. I have given my careful consideration to the rival contentions. The word "Salaries" is defined under section 15 of the Income-tax Act, 1961. It is provided that the income received by the assessee as salary from the employer or a former employer shall be assessed to income-tax under the head 'Salaries'. Section 17 of the Act defines 'Salary'. It provides that the salary shall include wages, any annuity or pension, any gratuity, any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages ...' Under section 17(3) of the Act "profits in lieu of salary" includes the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto.
9. It is in the light of these provisions of the Act the nature of the receipt in the hands of the assessee has got to be considered. It has to be noted that under the 1992 Act, the scope of assessment under the head "Salary" was limited. The scope under the 1961 Act has been enhanced considerably. Now reverting back to the issue in hand, one has to decide the nature of payment of Rs. 1.00 lakh received by the assessee. In this connection it is noteworthy that the assessee had established himself to be a very useful employee for the company. This is evident from the fact that the assessee had joined the company as an executive incharge of accounts on a salary of Rs. 925 per month. He was given quick promotions from time to time and had ultimately reached the status as a Financial Controller of the company. At the time of termination of the employment the assessee was drawing a salary of Rs. 7,000 per month. Apart from other dues payable to the assessee, the company had decided to pay a sum of Rs. 1.00 lakh, which was paid to the assessee in two instalments. A Resolution passed by the Board of Directors has been placed on record. This Resolution is dated 6th July 1987. The assessee had retired from the company in October 1986. If this Resolution were to be considered in isolation, one would get the impression that the sum of Rs. 1.00 lakh was paid to the assessee after the termination of the services. However, that is not so. There is a letter dated 29th October 1986 issued by the Chairman & Managing Director of the company available at page 19 of the Paper Book. By means of this letter the assessee was informed that the company had decided to pay a sum of Rs. 1.00 lakh to the assessee in two instalments of Rs. 50,000 on 31st October 1986 and 1st April, 1987 respectively. This letter also certifies that the said amount had been paid in consideration of good qualities and good personal character of the assessee. It is thus evident from the aforementioned letter that the amount of Rs. 1.00 lakh became due to the assessee at the time of retirement and not thereafter. As already pointed out, the assessee had established himself to be a valuable employee and the company had been benefited in several ways by the services rendered by him. The CIT(A) has noted in the appellate order that the assessee had prepared a Cost Audit Report, which his employer had forwarded to the foreign collaborators in U.K who had appreciated the same immensely. The company had been benefited substantially. The assessee, as already pointed out, had got several promotions for discharging his duties efficiently and immensely. It is in the light of these facts one has to consider the nature of the receipt of Rs. 1.00 lakh, It has also to be considered as to whether the letter issued by the company certifying that the payment being made for good qualities and good personal character reflects the true nature of the payment, and whether the same is conclusive.
10. The CIT(A), in his order, has elaborately explained as to how the employer as well as the foreign collaborators were impressed with the assessee, testimony of which is established by quick promotions given to the assessee from time to time. He has, therefore held that there was direct nexus between the services rendered by the assessee to the company and the payment of award in question. Relying upon the decision in the case of CIT v. Keshri Singh  106 ITR 184 (Raj.), it has been pointed out that even the voluntary payments or gifts, even though the same may not arise out of any contractual obligation or a standing practice, may still be taxable as income in the hands of the recipient.
Reference has also been made to the decision in the case of Beynon v.Thorpe 14 TC 1, where it has been held as under :- "It is perfectly true that a voluntary payment or a gift, though in itself not a profit or gain at all, may become a profit or gain in the hands of the recipient, if it can be attached to an employment or vocation." 11. In Para 6 of the order, the CIT(A) has rightly observed that the contention of the assessee that the award was given on account of personal qualities is not borne out by facts. "The assessee has not been able to point out any specific personal quality or trait in his character for which the said amount was paid by the employer". The CIT(A) has also referred to the note reproduced in Paras 2 and 3 of his order, on the basis of which it has been held and in my view rightly so, that the payment was made on account of the quality and nature of services rendered by the assessee in the course of his duties and the award is thus directly connected with his employment. In the certificate given to the assessee, his employer has treated the payment as part of his salary. The certificate issued by the employer that the payment was made for good qualities and good personal character, as already pointed out, is contrary to the facts and circumstances of this case, which show that the award was bestowed upon the assessee solely and exclusively in appreciation of the services rendered. The CIT(A) has referred to the decision in the case of Weston v. Hearn 25 TC 425, in support of his finding that 'the employer for the purpose of assisting an employee whom it does remunerate for his services, cannot relieve his employee from his obligation to pay income-tax by saying 'I do not intend it to be enumeration'." The CIT(A) has also rightly placed reliance on the decision of the Supreme Court in the case of P.Krishna Menon v. CIT  35 ITR 48. In that case the assessee viz., wholtaught vedanta was held to have carried on vocation of teaching and the gifts received from his disciples were held to be taxable as income as it was the imparting of teaching that was the 'cause cousans' of making of the gifts. In the present case it is the rendering of the services by the assessee that is the cause of the gift. Reference may also be made to the decision of the Supreme Court in the case of Sumati Dayal v. CIT 214 ITR 801/80 Taxman 89. In this case, the assessee carried on business as a dealer in art pieces, antiques and curios in Bangalore. During the assessment year 1971-72, it was claimed that she received a total amount of more than Rs. 3.00 lakhs be way or race winnings in jackpots and treble events in races at turf clubs in Bangalore, Madras and Hyderabad. The said amount was claimed to be a capital receipts. For assessment year 1972-73 also she claimed a receipt of Rs. 93,500/- as race winnings in two jackpots at Bangalore and Madras and the said amount was credited in the capital account. The Income-tax Officer included these amounts as income from other sources and assessed them. The matter went before the Settlement Commission, who took the view that the claim of winnings in races was false and what was passed off as such winnings really represented the assessee's taxable income from some undisclosed sources. The matter ultimately had reached to the Supreme Court, where it was held that the Settlement Commission after considering the surrounding circumstances and applying the test of human probabilities had lightly concluded that the appellant's claim about the amount being her winnings from races was not genuine.
12. Their Lordships of the Supreme Court in the case of CIT v. Durga Prasad More  82 ITR 540 also held that it is permissible for the taxing authorities to take cognisance of surrounding circumstances and the human probabilities in deciding the nature of the receipt.
13. Considering the facts and circumstances of the case and the surrounding circumstances which have been mentioned in this order as well as in the order of the CIT(A), I uphold the view taken by the CIT(A) that the amount of Rs. 1.00 lakh received by the assessee is in consideration of good quality and good nature of the services rendered by the assessee in the course of his duties and the payment is directly connected with his employment. The surrounding circumstances do not establish that the company had paid the amount to the assessee on account of good qualities and good personal character. The company is in business and the payment made to the assessee has been incurred as an expenditure in the course of carrying on of the business. If the payment had been made for good qualities and good personal character of the assessee, then there would be a strong doubt about the admissibility of that sort of an expenditure as expenditure laid down or incurred for purposes of business. That issue admittedly is not involved in this appeal. Nevertheless, that is also a relevant factor to be considered in determining the nature of the receipt.
14. The decisions cited on behalf of the assessee are distinguishable on facts. In the case of Mahesh Anantrai Pattani (supra), the sum of Rs. 5.00 lakhs paid to the assessee as personal gift for personal qualities was held as non-taxable. Similarly, in the case of K. K. Roy (supra), the assessee had received a gift from his former employer, which was held to be non-taxable. In the case of Dilip Kumar Roy (supra), the voluntary receipts in the nature of personal gifts and the receipts not arising from business, profession or vocation were held as not chargeable to tax. In the case of S. A. Ramakrishnan (supra), the cash presents received on birthday were held to be non-taxable on the ground that there was no material to say that the receipts were for remuneration of past performance. In the case of Ajit Kumar Bose (supra), it was held that the ex-gratia payment received on termination of service was not liable to tax as the payment was ex-gratia. In the case of CP. Chitrarasu (supra), the gifts received from friends and well-wishers by way of donations during public meeting connected with his birthday were held to be non-taxable in the hands of member of a political party. In the case of M. Balamurai Krishna (supra) a musician receiving amounts from fans in appreciation and not for rendering any service was held as non-taxable.
15. The facts in the aforementioned cases, as already pointed out, are distinguishable and, therefore, are inapplicable in this case. I therefore, hold that the CIT(A) was justified in upholding the assessment of sum of Rs. 1.00 lakh in assessment year 1987-88.
16. In assessment year 1988-89, the CIT(A) in fact deleted the addition of Rs. 50,000 on the ground that it has been assessed in assessment year 1987-88. The decision of the CIT(A) for assessment year 1987-88 has been confirmed. The assessee is not entitled to any relief as relief has already been allowed by the CIT(A) by deleting the addition.
17. As per the ground of appeal raised, the assessee has challenged the decision of the CIT(A) to treat the amount of Rs. 50,000 as part of salary. This issue has been decided in assessment year 1987-88 and the claim of the assessee has not been accepted.
18. In the result, the appeals of the assessee for both the assessment years are accordingly dismissed.