Horace Owen Compton Beasley, Kt., C.J.
1. Two questions are referred to us by the Income-tax Commissioner, namely:
(1) Whether the sum of Rs. 36,794 paid to Mr. Fletcher in 1932 - 1933 was income liable to tax or was a capital sum exempted under Clause (v) of Sub-section (3) of Section 4 or otherwise, and
(2) Whether Mr. B.J. Fletcher is entitled to relief under Section 25(3) of the Act on the ground alleged by him namely that he discontinued his profession in the year of account.
2. The sum set out in the first question was received by the assessee in the year of account as an employee of the Buckingham and Carnatic Co., Ltd., Madras over and above his monthly pay. This sum he received out of the Officers' Retiring Fund of the Company. It is a fund created by the Company and its constitution and management are governed by certain rules framed by the Company and the directors of the Company for the time being have full discretion to alter, interpret or add to those rules which are before us. The Company allots every half year a certain sum to the credit of this Fund and this sum is invested and accumulated at the discretion of the directors of the Company. The half-yearly allotment is divided amongst the several officers of the Company eligible to the benefits of the Fund in proportion to their salaries and credited half-yearly to accounts maintained in the names of the several officers. Each Officer is given a pass-book in which are entered the amounts so credited to his account with the Fund. The proportionate interest realised on the investments is also credited to this account. No officer admitted to the benefits of the Fund has any claim on the Company in respect of the amount shown at the credit of his account until he shall have previously served the Company continuously and satisfactorily for a prescribed period (six years in the case of the petitioner (sic) and in no case can the amount to the credit of an officer become payable to him until he leaves the service of the Company. The directors of the Company have full discretion to decide which of the officers of the Company shall from time to time be eligible to the benefits of the Fund. They have full power to dispense with the services of or dismiss any such officer and such persons have no claim against the Fund if they have not served for the prescribed period. The amount allotted each half year to the credit of the Fund is not treated as expenditure incurred by the Company for the purposes of its assessment; but any amount paid out of the Fund to an employee in account with the Fund at the time of his retirement is treated as expenditure incurred by the Company in the year of payment for the purposes of its assessment. The amount credited each half year to the account of the assessee was not treated by him as his income of that year in any of the returns filed by him nor was it ever assessed to tax as income of any year prior to 1932 - 1933. As before mentioned, the total amount to the credit of the assessee's account with the Fund on the date of his retirement was Rs. 36,794-3-2. This amount was paid to him by the Company on the 29th March, 1933 after deducting Rs. 6,496-7-0 on account of Income-tax under Section 18(2) of the Act.
3. It was contended on behalf of the assessee that this was not a payment of a gratuity coming under the head of 'salaries' in Section 7(i) of the Income-tax Act. This payment was variously described by learned Counsel for the assessee as a gift, as being akin to commuted pension or a windfall. In my opinion, this is in no sense a gift because, provided that the officer has fulfilled the conditions laid down in the rules, on his retirement he has a legal claim to the amount standing to his credit; nor, in my opinion, can it be described as being in the nature of a windfall such as the payment was held to be in Commissioner of Income-tax, Bengal v. Shaw, Wallace & Co. where the Company on the; termination of an agency received a sum of money to compensate them for its cessation and that sum was held not to be taxable income under Section 6(iv) (business) nor under Section 6(vi) (other sources). The case most favourable to the assessee is Rutherford v. Commissioner of Income-tax, Bihar & Orissa I.L.R.(1930) 10 pat. 315. The facts in that case were that it had been the custom of the Bettiah Raj under the management of the Court of Wards to grant a lump sum to its managers when they laid down their office. This practice had been sanctioned by the Government in the cases of successive managers and it was one of the inducements offered to candidates for the office. It was recognised that there was no legal obligation upon the Raj or the Government to make the payment but having regard to the established practice it was nevertheless a matter of reasonable expectation and incentive to accept an onerous office at a comparatively small salary and to perform the duties in an efficient manner. In pursuance of this practice, Mr. Rutherford received a sum of Rs. 75,575 which the Income-tax authorities sought to assess but it was held that the sum was in the nature of commuted pension falling within Section 4(3)(v) of the Act and was exempt from taxation, the contention for the Crown having been that the sum paid was a gratuity and not a pension. The learned Chief Justice says at p. 318:
The candidate, therefore, enters upon his office under the Court of Wards with a definite salary and the expectation that he will receive at the end of his service the equivalent of a pension but he knows that he will not after his retirement be given a series of periodical payments but in lieu thereof he will get a lump sum. In other words he is to get a pension which will certainly be commuted.
4. It was found as a fact that, if it were not for the expectation of this gratuity, the Court of Wards would have to pay higher salaries to the officers and further:
No doubt the Court of Wards do not pay pensions or guarantee gratuities but allow a gratuity in each case as an act of grace. But it is none the less true that the Court of Wards do invariably pay gratuities to their deserving servants on retirement.
5. It is pointed out in the judgment that it was not possible for the Court of Wards or the Government to offer the candidate a pension consisting of periodical payments because the payment might be repudiated by the owners after the estate was released from the management of the Court and that therefore the practice had been established of treating officers-of the Court, if the finances of the state permitted, in the same manner as Government Servants and of paying to them a sum equal to that payable as commutation of pension on the scale set forth for such commutation appended to the Civil Service Regulations plus in very meritorious cases one-fourth of such amount. The facts are different here. But it remains to be seen whether the dissimilarity really makes any difference. In that case, the payment was allowed as an act of grace. In the present case, it is not an act of grace at all but the Company by its rules binds itself, subject to conditions, to pay an amount, although not specified, to its officers who come under the rules provided that they fulfil the conditions, on retirement. Moreover, there is no indication here, as far as I am able to see, that the sum payable is based on any scale for the commutation of pensions such as there was in Rutherford v. Commissioner of Income-tax, Bihar and Orissa I.L.R.(1930) 10 Pat. 315 and there is this fact also that in the rules the sums allotted half-yearly by the Company to the credit of the Fund are described as bonuses and they are apportioned as between the officers of the Company. Throughout the rules the sums are described as bonuses and ultimately the Company is to pay to the officer 'the aggregate amount of his share in the various bonuses that may have been credited to the Fund by the Company during the period of his service with the Company,' whereas there was no such periodical allotment of sums to the managers in the Rutherford v. Commissioner of Income-tax, Bihar and Orissa I.L.R.(1930) 10 Pat. 315 and it is of course quite clear that the allotment of a bonus is dependent upon the earning of profits by the Company and bonuses may be increased or reduced or may not be allotted at all. There is no evidence that the officer receives a smaller salary by reason of the fact that there is this payment coming to him on his retirement nor under the circumstance of the crediting each half-year of the bonuses can a lump sum payment of the Fund be considered as a payment for past services. It is impossible to avoid the conclusion that the allotment is being made for present services and Mr. Patanjali Sastri contends that this sum is, as it is described in the rules, an accumulation of bonuses. It is conceded that in respect of cash bonuses paid to an officer in addition to salary they are assessable to income-tax under Section 7 as profits received by the officer in addition to his salary. Hence Mr. Patanjali Sastri argues that this is a receipt of accumulated bonuses by the assessee in addition to his salary. It seems to me that there is much force in this argument. It is difficult to see how this sum can be held to be a sum paid in commutation of a pension. You have, first of all, got to have a scheme of pension in order that a pension can be commuted and it is only if this was a commuted pension that Section 4(3)(v) can apply. The words of the section are not a sum received 'in lieu' of a pension but 'in commutation' of it and I cannot see that the sum can be described as equivalent of a pension as in the Rutherford v. Commissioner of Income-tax, Bihar and Orissa I.L.R.(1930) 10 Pat. 315. Nor can I agree with Mr. T.M. Krishnaswami Aiyar's argument that it is akin to commutation of pension because he concedes that there must first of all here be something that is akin to a pension and then the payment must be akin to commutation of such a pension. It is true that the Company pays its officers no pension on retirement and that this a lump sum payment on retirement but I regret that I am unable to hold that that in itself is sufficient to exempt the money from assessability to income-tax. In my opinion the contention put forward by Mr. Patanjali Sastri for the Income-tax Commissioner is correct and this amount must be regarded as sums set apart periodically, that is to say, half-yearly, by the Company in respect of present services rendered by the assessee as an addition to salary under Section 7(1) of the Act. Instead of being actually paid then, they are allowed to accumulate and are paid to him in a lump sum on his retirement and, being accumulations of sums credited to him for present services, I feel that the fact they are paid to him at the end of his service in a lump sum does not make any difference; and I regret, therefore, that I am unable to agree with the answers of my learned brothers Cornish and Pandrang Row, JJ. Which are about to be given upon this point.
6. There remains the other question raised, namely, Question No. 2. I am clearly of the view that this question must be answered in the negative. The assessee's contention is that he has received this amount by reason of the vocation carried on by him. The answer to this contention is that he has been assessed under the head of ' salary' under Section 7 (1) of the Act. Section 6, provides that:
The following heads of income, profits and gains, shall be chargeable to income-tax in the manner hereinafter appearing namely: - (i) salaries, (ii) Interest on securities, (iii) Property, (iv) Business, (v) Professional earnings and (vi) other sources.
7. Each of these is dealt with in separate sections of the Act. The assessee has always been assessed under Section 7(1). This income clearly does not fall under any of the Clauses (ii), (iii), (iv), (v) and (vi). Section 25(3) was intended to prevent a double assessment. It cannot be intended to apply to a case where income-tax is assessed on salaries in the year in which they are earned. If the section were to apply, it would lead to this very strange and unreasonable result that an assessee who chooses to relinquish his appointment in the eleventh month of the year would escape payment of income-tax on the salary earned by him in these eleven months whereas, if he continued f of one month longer, admittedly he would be assessable on his salary in the whole of the twelve months. Mr. T.M. Krishna-swami Aiyar was quite unable to give any reason why such should be the result. In my view, therefore, as this sum falls to be assessed under Section 7(1) of the Act, Section 25(3) cannot be applied to it. I would, therefore, answer both questions accordingly. In view however of the answers of my learned brothers Question No. 1 must be answered in favour of the assessee. Question No. 2 is answered in the negative. Costs. Rs. 250 to the assessee.
8. Upon the first question referred, my opinion is that the sum of Rs. 36,794 received by Mr. Fletcher from the Company on his retirement was not income. Income, as their Lordships of the Judicial Committee have explained in Commissioner of Income-tax, Bengal v. Shaw Wallace & Co. connotes a periodical monetary return ' coming in ' with some sort of regularity, or expected regularity, from definite sources. If the payment made to Mr. Fletcher can be regarded, as contended on behalf of the Commissioner, as a payment of deferred salary or of an accumulation of salary, which had been credited to him, but not actually received by him while he was in the service of the Company, it would, I think, be income when he did receive it. It would be salary or a gratuity or profit received by him in addition to his usual salary as much as the cash bonuses paid to him from time to time by the Company were salary. But in my opinion the contributions made by the Company to the credit of its officers in the Officers' Retiring Fund are not part of the officers' salaries, nor are they a gratuity or profit received by the officers in lieu of or in addition to salary. This contribution is called a bonus in the rules of the Fund. But the name is not of much significance. It is in fact a voluntary contribution made by the Company to the Fund under the conditions framed by the Fund Rules, and the true character of the contribution must be gathered therefrom. An officer who has served the Company for the requisite period becomes qualified to membership of this Fund. He will be credited with his appropriate share in the contributions made by the Company to the Fund; and it appears that a pass-book is issued to the officers showing how their credit stands in the Fund. Rule 2, provides that every bonus shall in the first instance be apportioned as between the officers of the company in proportion to the salaries drawn by them respectively at the date of the allotment of such bonus by the Company and shall be credited in such proportions to such officers in account with the Fund. -But the Rules do not require that the Company shall make any contribution to the Fund at any particular period. It is a matter which is left entirely to the pleasure of the Company. And the directors of the Company have sole control over the investment of the money in the Fund.
9. The rules provide that no officer shall have any claim, against the Company in respect of any bonus or otherwise as regarding the Fund until he leaves the service of the Company and shall have previously served the Company continuously and satisfactorily for the period required of him by the rules. In the event of his death during his term of service it is provided that the amount then standing to his credit in the Fund shall be paid to his legal representative; but the rules give him no power of nomination over the amount to his credit in the Fund. Then Rule 6 says that in the event of an officer leaving the service of the Company or being dismissed before having completed the term of service required of him, the amount standing to his credit shall be apportioned to the credit of the other officers then in the employ of the Company. And Rule 7 provides that nothing contained in the rules shall in any way be taken to restrict the powers of the Company from at any time dispensing with the service of, or dismissing any officer. This Rule further provides that an officer whose service shall be dispensed with or who shall be dismissed before completing his full period of service shall have no claim whatever against the Fund.
10. These conditions imposed upon an officer's right to receive payment from the Fund entirely negative, in my judgment, the notion that the amount credited to him in the Fund is credited to him by way of salary or as a gratuity in lieu of or in addition to salary. If these credits were intended to be an additional remuneration I cannot imagine why, in the event of an officer's service being dispensed with, for no fault of his own, he should be disqualified by Rule 7 from at least receiving so much as he had earned to his credit up to that date. I think the only feasible explanation is that the bonuses credited to an officer in the Fund are not intended to be salary or gratuity. If the amount received from the Fund by an Officer on his retirement is not given to him as salary it is not income liable to tax under Section 7(1). It is not suggested on behalf of the Commissioner that the sum is taxable under any other head of income.
11. I am unable to perceive any essential difference between the payment of a lump sum from this Officers Retiring Fund to an officer on his retirement and the payment of a lump sum from a Provident Fund to an employee on his retirement, or the payment of a sum, with accrued bonuses, payable to the assured under a policy of insurance. The two last mentioned sums are-specifically-exempted from taxation by Section 4, Sub-section 3, Clause (5) of the Act. But this exemption is not an arbitrary one. In Commissioner of Income-tax, Bengal v. Shaw Wallace & Co. (1932) L.R. 59 I.AA. 206 : I.L.R.1932 59 Cal. 1343 : 63 M.L.J. 124 (P.C.), their Lordships have pointed out that none of the sums specified in Clause (5), apart from their exemption by the Act, could be regarded in any scheme of taxation as income. The reason is that payments such as those mentioned in Clause (5) do not come within the meaning of the word 'income' as defined by their Lordships. For these reasons my answer to the first of the questions referred is in favour of the assessee.
12. With regard to the second question I think that a comparison of Section 25(3) with Section 11 of the Act makes it clear that the profits from a profession or vocation mentioned in the first named section mean the professional earnings which are taxable under Section 11(v). An assessee can only have the benefit of Section 25(3) if he has been assessed for tax on professional earnings. I would therefore answer the second question against the assessee.
Pandrang Row, J.
13. This is a reference made by the Commissioner of Income-tax, Madras, under Section 66(2) of the Indian Income-tax Act (XI of 1922) at the instance of Mr. J.B. Fletcher, who was an employee in the service of the Buckingham and Carnatic Mills Co., Ltd. for about 24 years till 28th February, 1933 when he retired from service. During the period of his employment the Company was paying him a monthly salary as well as a half yearly cash bonus out of its profits, and income-tax was being collected on these amounts. The Company had constituted an Officers' Retiring Fund and made rules for its management. The Company allotted every half year out of its profits a certain sum to the credit of this Fund and invested the same; the amount together with the interest earned was apportioned between such of its officers as were admitted to the benefits of the Fund in proportion to their salaries and the amounts credited to each officer were shown in a separate pass book given to him. The Company undertook to pay the amount lying to the credit of an officer to him on his leaving its service after having previously served continuously and satisfactorily for a certain period (six years in Mr. Fletcher's case) to the officer, and in the event of his death, whether during or after the said period of service, to his legal representatives. In the event of an officer leaving the company's service or being dismissed before completing the said period of service he is to have no claim whatever to the amount lying to his credit in the Fund, and the same is to be apportioned to the credit of other officers then in the employ of the Company. The last rule declares the right of the Directors of the Company to decide in their discretion which of the officers shall be eligible for the benefits of the Fund, and to make any alteration or addition to the Rules, and that the Directors' decisions on these points and also as to the meaning of the rules and on all other matters connected with the Fund or its administration shall be final and conclusive.
14. When Mr. Fletcher retired from the Company's service on the 28th February, 1933, the amount to his credit in the Retiring Fund was Rs. 36,794-3-2, and when paying this amount to him the Company deducted therefrom Rs. 6,496-7-0 as income-tax, and remitted the amount of tax to the Government of India. Mr. Fletcher objected to this deduction of income-tax on two grounds, namely, that the amount of Rs. 36,794-3-2 paid out of the Retiring Fund was not his income, and that he was not liable to any assessment to income-tax during the year 1933-1934 under Section 25(3) of the Act as he had ceased to be in the Company's employ, and thereby discontinued his vocation during that year. These objections were overruled by the Income-tax Officer, and also, on his appeal by the Assistant Commissioner of Income-tax. The same objections are repeated in the questions raised in the present reference, namely:
(1) Whether the sum of Rs. 36,794 paid to Mr. Fletcher in 1932-1933 was income liable to tax, or was a capital sum exempted under Clause (v) of Sub-section 3 of Section 4 or otherwise;
(2) Whether Mr. Fletcher is entitled to relief under Section 25(3) of the Act on the ground alleged by him, namely, he discontinued his profession in the year of account.
15. The second question does not involve any real difficulty. The words of the Sub-section relied upon are themselves clear, and they show that it applies only where the business, profession or vocation which is discontinued is one on which tax was at any time charged under the provisions of the Income-tax Act, 1918. Even on the assumption that Mr. Fletcher's employment as an officer of the Comany was a profession or vocation, it was never assessed to tax as such under the Act of 1918; the assessment of his income from such employment was under the head of 'salaries', and not under the head of profits from any profession or vocation followed by him. It is not contended that the employment was a business as denned in the Act. It is moreover, clear that the provisions of this sub-section were meant to apply only to cases in which there had been a double assessment to tax in the year 1922-1923 as a result of the change brought about by the Act of 1922. See Nachiappa Chettiar v. The Commissioner of Income-tax, Madras (1933) 6 I.T.C. 369 (3) at 373. It is stated in the reference as a matter of fact, and this statement is not controverted before us, that so far as salaries were concerned there was no such double assessment in the year 1922-1923, and that Mr. Fletcher in particular was not assessed to tax in the year 1922-1923 in respect of his income in the previous year. Mr. Fletcher's claim to relief under Section 25(3) of the Act cannot therefore be sustained either on the words of that sub-section or on any other ground. The second question must therefore be answered in the negative.
16. The first question in the reference calls for fuller consideration. It is obvious that the Officers' Retiring Fund was constituted in order to make provision for the employees at the time of their retirement and for their legal representatives in case of their death while in service. The Company allotted certain amounts from its profits to this Fund every half-year and these amounts which were invested and the interest derived therefrom were apportioned among the employees and credited to their separate accounts. There is nothing in the Rules of the Fund which contemplates that the Company might at any time take back for its own use or for any other purpose the monies so credited to its employees, even though the monies are actually retained in its own hands. The retention of the monies was only for the purpose of making payments out of the Fund to the employees under the Rules, and the Company never had any beneficial interest in the monies credited to the employees. The Company had no doubt full discretion in the matter of allotment, but once the allotment was made its rights were confined to mere administration of the Fund for the benefit of its employees. As monies were allotted every half year to the Fund from the Company's profits they were not treated as the Company's expenditure when assessing the Company's profits to tax; in other words they were included in the profits and taxed as such, and^ they were shown in the Company's half yearly balance-sheet under 'Capital'. Considering all the circumstances it would appear that after the monies were allotted by the Company to the Retiring Fund, the Company invested them and held the accumulations as trustee for its employees, and acted in the same capacity when making payments out of them under the Rules. If this contention on behalf of Mr. Fletcher is correct it follows that the payment made by the Company to Mr. Fletcher was not a payment made by the Company as an employer but a payment made by it as trustee, and cannot therefore be assessed to tax under the head of salaries. See In re The Commissioner of Income-tax, Burma v. The Rangoon Electric Tramway and Supply Co., Ltd. I.L.R.(1933) 11 Rang. 70 and the 2nd sub-paragraph of paragraph 25, Income-tax Manual, p. 169 (5th Edition). In the Rangoon case there was no doubt an actual transfer of the shares which were purchased from the monies allotted as bonuses to the Managing Director of the Company and the employee. But actual transfer of ownership to the trustee is not always necessary to create a trust in relation to moveable property; under Section 5 of the Indian Trusts Act (II of 1882) a declaration of trust is sufficient in such a case, and under Section 3 of that Act an obligation annexed to the ownership of property arising out of a confidence declared and accepted by the owner for the benefit of another is a trust. The Rules of the Fund framed by the Company are a sufficiently clear declaration of a trust in favour of the employees admitted by the Company to the benefit of the Fund.
17. On behalf of the assessee Mr. T.M. Krishnaswami Aiyar next contends that the payment in question is covered by either the 5th or the 7th clause of Sub-section 3 of Section 4 of the Income-tax Act. The 5th clause is relied upon in support of the contention that the payment of Rs. 36,794 to Mr. Fletcher is payment of a capital sum in commutation of pension. Mr. Patanjali Sastri argues contra that commutation of a pension ordinarily implies a pension there being no pension in the present case, and that while commutation of a pension, moreover, involves the consideration of factors such as the age and state of health of the pensioner, and the general rate of interest and the like, no such consideration was required in the present case. There can be no doubt that a pension is a periodical allowance for past services, and that by commutation a lump sum is paid in lieu of the periodical payments. See The Municipal Council, Salem v. Gururajah Rao (1934) 68 M.L.J. 118. Mr. T.M. Krishnaswami Aiyar, however, relies strongly on Rutherford v. The Commissioner of Income-tax, Bihar and Orissa I.L.R.(1930) 10 Pat. 315 in which it was held that a lump sum paid not as pension but expressly as gratuity by the Court of Wards as employer to an employee after the latter's retirement was a capital sum paid in commutation of pension, although no single payment of an instalment of pension was ever made to the employee. The argument that there must first be pension and that the commutation must follow in point of time was characterised by Courtney Terrell, C.J., as being not well founded. The same argument put in slightly different language, namely, that no pension was admissible to the employee and that, therefore, there was nothing to commute was answered by Dhavle, J. as follows:
The answer to this contention is that the precise form used is of little moment in interpreting the Income-tax Act. What must be looked at is the real nature of the sum in question, and it is clear from the official correspondence that what was given to the assessee on his retirement from service was, but the equivalent of a commuted pension in essence, in spite of the technical reason for which it was recommended and sanctioned under the denomination of gratuity.
18. Both the learned Judges agreed that what must be considered is the real nature of the transaction. Counsel on both sides in the present case are also agreed that the real nature of the payment must be ascertained for the purpose of deciding the point.
19. There is no doubt in my mind that the payment of Rs. 36,794 to Mr. Fletcher on his retirement from the Company's service was in substance and in truth the payment of a lump sum in lieu of pension, that is, in consideration of his past services. The amount depended in part at least on the length of his service, and it was paid, out of what has always been designated as the Officers' Retiring Fund, under the rules of that Fund. The existence of such a Fund may reasonably be presumed to have been, and to be one of the inducements offered by the Company to those who sought and still seek to be employed in its service, especially in the absence of any other provision after retirement in the shape of pension. The prospect of getting on retirement after long and approved service a pension or its equivalent, by whatever name it may be called, is one of the important factors which attracts candidates for employment; in short, there are three such important factors, namely, pay, promotion and pension; whatever shape these may take, they do not change in essence. In Rutherford v. The Commissioner of Income-tax, Bihar and Orissa I.L.R.(1930) 10 Pat. 315 the position was stated by Courtney Terrell, C.J. as follows at p. 318.
The candidate therefore enters upon his office under the Court of Wards with a definite salary and the expectation that he will receive at the end of his service the equivalent of a pension, but he knows that he will not after his retirement be given a series of periodical payments, but in lieu thereof will get a lump sum. In other words, he is to get a pension which will certainly be commuted.
20. The position is more or less the same in the present case. The words 'in commutation of' found in Section 4(3)(y) of the Act do not necessarily convey a meaning essentially different from that of the words 'in exchange of' or 'in lieu of'; the essential idea is substitution or change. If instead of paying a pension, that is, a periodical payment for past services, an employer elects from the very outset to pay a lump sum, or, in other words, the pension scheme adopted by an employer contemplates the payment of a lump sum, instead of periodical payments, as pension, the real nature of the payment is not affected thereby, and what was all the time intended as pension or reward for past service does not lose its character. In short, when a lump sum is paid as pension its receipt by the employee comes within the 5th clause of Section 4(3) of the Act.
21. In view of this conclusion it is unnecessary to consider the alternative claim to exemption under the 7th clause of Section 4(3) of the Act. That clause can apply only when the receipt is not by way of addition to the remuneration of an employee. Mr. T.M. Krishnaswami Aiyar relies in this connection on the decision of the House of Lords in Seymour v. Reed (1927) A.C. 554 to the effect that the payment of the proceeds of a benefit match to a professional cricketer by the Club which employed him is a personal gift and not a profit or perquisite arising from his employment, and therefore not assessable to tax. The facts of the present case are however different; it is not a solitary gift with which the present case is concerned, but a series of gifts made every half year out of the employer's profits to the Employees, Retiring Fund and as part of the conditions of employment. The words used in the Indian Income-tax Act are moreover different from those found in the English Income-tax Act, and this difference recalls to one's mind the following observations of their Lordships of the Judicial Committee in Commissioner of Income-tax, Bengal v. Shaw, Wallace and Co. (1923) 59 I.A. 206 : I.L.R. 1923 59 Cal. 1343 : 1923 63 M.L.J. 124 (P.C.).
Their Lordships would discard altogether the case-law which has been so painfully evolved in the construction of the English Income-tax Statutes both the cases upon which the High Court relied and the flood of other decisions which has been let loose in this Board. The Indian Act is not in pari material.... Under such conditions their Lordships think that little can be gained by attempting to reason from one to the other, at all events in the present case in which they think the problem lies very near the surface of the Act and depends mainly on general considerations.
22. The observations which follow the above deal with the general question of what 'income' is, and they are of considerable importance in the present case which raises the general question whether the payment of Rs. 36,794 to Mr. Fletcher is income liable to tax. Their Lordships had also to consider the argument based on Section 4(3)(v) of the Act, the words of which appear to suggest that the word 'income' may have a wider significance than would ordinarily be attributable to it, and they were of opinion that the clause cannot be construed 'as enlarging the word 'income' so as to include receipts of any kind which are not specially exempted'. The character of 'income' is described by their Lordships as follows:
Income, their Lordships think, in this Act connotes a periodical monetary return 'comming in' with some sort of regularity, or expected regularity from definite sources.
23. The sum of Rs. 36,794 received by Mr. Fletcher on his retirement was not of the nature of a periodical return; it was a unique receipt, not to be repeated. It is, to my mind, difficult to regard it as 'income' in view of what their Lordships of the Judicial Committee have said in the case referred to above. The source from which Mr. Fletcher received the money was the Officers' Retiring Fund, and under the Rules of that Fund only one receipt and no more could be expected by him or by any other employee. It was not a source from which periodical monetary returns could come in so far as the employee was concerned. The only return he could expect was a single payment on retirement. I am therefore of opinion that the receipt of the lump sum in question is not income.
24. It follows from the above that the first part of the first question must be answered in the negative and the second part in the affirmative.