What did the High Court hold?

The High Court dismissed the revenue's appeal on the grounds of valuation and maintainability. However, it reserved liberty for the revenue to revive the appeal if they succeed in related matters before the Supreme Court.

The revenue appealed against a tribunal order holding that a payment received by the assessee was a capital receipt, not taxable as profit in lieu of salary. The core dispute was whether an employer-employee relationship existed.

What were the issues?

Whether the payment received was a capital receipt or profit in lieu of salary, and whether an employer-employee relationship existed.

Which sections of the Income-tax Act were involved?

Section 17(3)(iii), Section 260A

CIT vs Sri Y Dwarakanath | Karnataka High Court 2013

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

Dated this the 21st day of January, 2013

PRESENT

THE HON’BLE MR JUSTICE D V SHYLENDRA KUMAR AND THE HON’BLE MR JUSTICE B SREENIVASE GOWDA

Income Tax Appeal No. 669 of 2007 BETWEEN:

THE COMMISSIONER OF INCOME-TAX C R BUILDING QUEENS ROAD BANGALORE.

THE ASSISTANT COMMISSIONER

OF INCOME-TAX CIRCLE – 14(2) C R BUILDING,

QUEENS ROAD BANGALORE.

… APPELLANTS

[By Sri K V Aravind, Adv.]

AND:

SRI Y DWARAKANATH H NO. 12-13-830/39 GOKULNAGAR BEHIND APDDC TAMAKA SECUNDARABAD.

… RESPONDENT

[By Sri C V Mudrabettu, Adv. for Sri S R Shivaprakash, Adv.]

2 THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER DATED 20.04.2007 PASSED IN ITA NO. 288/BANG/2005, FOR THE ASSESSMENT YEAR 2002-03, PRAYING TO SET ASIDE THE SAID ORDER OF THE TRIBUNAL AND ETC.,

THIS APPEAL COMING ON FOR HEARING, THIS DAY, SHYLENDRA KUMAR J., DELIVERED THE FOLLOWING:

J U D G M E N T

This appeal by the revenue under Section 260A of the Income Tax Act, 1961 [for short, the Act], though had been admitted to examine the following substantial questions of law, is listed for hearing: 1. Whether the Tribunal was correct in holding that the payment recovered by the assessee of Rs.11,49,467/- is a capital, receipt not liable to tax when the employer-employee relationship between CISCO Systems and the assessee had not materialized and therefore the amount received could not be treated as profit-in-lieu of salary under section 17(3)(iii) of the Act.

Whether the Tribunal was correct in holding that there was no employer- employee relationship ignoring the fact that Form-16 issued by the employer company points to the fact that the assessee was an employee owing to the acceptance of the offer letter given by

3 CISCO Systems, conferring the status of an employee on the assessee without which the payment received for termination of service would not have been made by the employer.

Sri K V Aravind, learned standing counsel for the appellant-revenue and Sri C V Mudrabettu for Sri S R Shivaprakash, learned counsel for respondent-assessee submit that having regard to the valuation of the subject matter of this appeal, which is in a sum of Rs 3,58,904/- and having regard to the board circular, the appeal, though, may be disposed of as not tenable, liberty may be reserved to the appellant-revenue for reviving the matter in the event of success of the revenue before the Supreme Court in SLP No 27468 of 2010 and connected matters, wherein a similar orders have been made subject matter.

In the light of this submission, this appeal is dismissed only on the ground of valuation and maintainability, but reserving liberty to the revenue to seek for revival of the appeal in the event of success in the

4 special leave petition before the Supreme Court, as noticed above.

Sd/- JUDGE

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THE COMMISSIONER OF INCOME-TAX vs. SRI Y DWARAKANATH

What did the High Court hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

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