THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 12.12.2008
+ ITA 1348/2008
COMMISSIONER OF INCOME TAX ... Appellant
- versus -
SMT. RANI SHANKAR MISHRA ... Respondent
WITH
+ ITA 1386/2008
COMMISSIONER OF INCOME TAX … Appellant
– versus –
SMT. RANI SHANKAR MISHRA ... Respondent
Advocates who appeared in this case:
For the Appellant : Mr J.R. Goel
For the Respondent : Mr Uday Shankar Mishra alongwith
the respondent (in person)
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE RAJIV SHAKDHER
1. Whether Reporters of local papers may be allowed to
see the judgment ? YES
2. To be referred to the Reporter or not ? YES
3. Whether the judgment should be reported in Digest ? YES
ITA Nos.1348/08 & 1386/2008 Page No.1 of 7
BADAR DURREZ AHMED, J (ORAL)
1. The revenue is in appeal being aggrieved by the common
order dated 09.05.2008 passed by the Income-tax Appellate Tribunal in
relation to the assessment years 2003-04 and 2004-05. The Assessing
Officer had made an addition in respect of the amount of compensation
and interest received by the assessee from the Government of the
United States of America.
2. In January, 1982, the assessee had applied for a job in the
Voice of America which was a state owned broadcasting agency. In
1984, the assessee was informed that she had cleared the competitive
test. But, she was never offered the job. It is relevant to note that in
1977, a class action suit had been filed before the United States District
Court for the District of Columbia, United States entitled Carolee
Brady Heartman, et al. v. Madeleine K. Albright, Secretary of State
and Marc B. Nathanson, Chairman, Broadcasting Board of
Governors: Civil Action No.77-2019 JR. The said class action had
been brought on behalf of the women who had been denied
employment in certain professions and technical positions in the former
United States Information Agency (USIA). The allegation was that the
women had been denied entry into certain positions because of their
sex, in violation of Title VII of the Civil Rights Act of 1964 of USA.
ITA Nos.1348/08 & 1386/2008 Page No.2 of 7
3. The matter had travelled right upto the United States
Supreme Court and, thereafter, the claim forms filed by over 1100
women were being analysed. One claim form was also submitted by
the assessee in 1989. In the course of hearing of individual claims,
hearing in respect of 48 such class members had been concluded and 46
out of them had won in whole or in part. Based on this information and
the knowledge acquired during the hearings, a proposal was made by
the Government of United States to settle the entire class action for
US$ 508 million. The said settlement offer was accepted and a consent
decree, which was approved by the United States District Court for the
District of Columbia on 22.03.2000, was drawn up. As per the consent
decree, each of the members of the class other than those whose cases
had been individually settled by then, were entitled to the said sum of
US$ 508 million in full and final settlement of all claims for the relief,
including without limitation, all claims for back pay, instatement, front
pay, retirement and other employee benefits and pre-judgment interest.
Post-judgment interest was also decreed from the date on which the
consent decree was approved by the court upto the date of payment.
Consequently, the assessee received her share out of US$ 508 million
which was given to the entire class of 1100 claimants (except those
claimants whose cases had been individually decided by then).
ITA Nos.1348/08 & 1386/2008 Page No.3 of 7
4. The question that has arisen in the present case is whether
the said amount received by the assessee in the two assessment years in
question would be covered within the expression “profits in lieu of
salary” as appearing in Section 17(3)(iii) of the Income-tax Act, 1961.
The Commissioner of Income-tax had categorically found as a fact that
there was no employer-employee relationship between the assessee and
the Voice of America or the United States Government. Consequently,
the Commissioner of Income-tax (Appeals) concluded that the said
amount received by the assessee cannot fall within the concept of
“salary”. The tribunal also noted the factual position that the assessee
was, in fact, never offered the job. Consequently, the only conclusion
that could be arrived at with regard to the nature of the amount received
by the assessee was that it was not offered as a part of or arising out of
the employment of the assessee. The amount was received by the
assessee by way of compensation for not having been offered the job
with the Voice of America. The allegation was, as noted above, that
she alongwith about 1100 other women had been discriminated against
on the ground of sex and had not been offered jobs by the Government
agency.
5. Section 17(3)(iii) reads as under:-
“17. “Salary”, “perquisite” and “profits in lieu of
salary” defined. –
xxxx xxxx xxxx xxxx xxxx
ITA Nos.1348/08 & 1386/2008 Page No.4 of 7
(3) "Profits in lieu of salary" includes -
(i) xxxx xxxx xxxx xxxx xxxx;
(ii) xxxx xxxx xxxx xxxx xxxx;
(iii) any amount due to or received, whether in
lump sum or otherwise, by any assessee
from any person –
(A) Before his joining any employment
with that person; or
(B) After cessation of his employment
with that person.”
The expression “profits in lieu of salary” bears reference to the
provisions of Section 17 (1) which defines salary for the purposes of
Sections 15, 16 and 17. Salary, inter alia, includes profits in lieu of
salary as per Section 17(1)(iv) of the said Act. It is in this context that
the expression “profits in lieu of salary” has been defined in Section
17(3) of the said Act. The case of the revenue is that the amounts
received by the assessee fall under Section 17 (3)(iii) of the said Act.
We have already extracted the relevant portion of Section 17(3)(iii)
above. A plain reading thereof would indicate that the amount due or
received whether in lump sum or otherwise by an assessee from any
person must be in connection with the employment with that person.
Sub-clause (A) refers to the period prior to an assessee joining such
employment and sub-clause (B) refers to the period after cessation of
an assessee‟s employment with another person. We have already noted
above that the Commissioner of Income-tax (Appeals) clearly found as
a fact that there was no employer-employee relationship. The Income-
ITA Nos.1348/08 & 1386/2008 Page No.5 of 7
tax Appellate Tribunal has also observed that the assessee was never
offered any job. We have also examined the consent decree and the
background to the settlement which was offered to all the members of
the class action. It is clear that the class action itself was based on the
ground that the members of the class had been denied entry into certain
positions because of their gender. The very basis of the class action is
that they had not been given the job for which they had applied on the
ground of discrimination based on their sex. This clearly implies that
none of the class members, including the assessee, had ever been
offered a job by the Voice of America or by any other governmental
agency of the USA. In fact, the very concept of a salary is that it is
regarded as a reward or recompense for the services performed. The
assessee never performed any service as she was never given the job.
Thus, the revenue‟s contention that the said amounts received by the
assessee were in the nature of „profits in lieu of salary‟, cannot be
accepted.
6. Both the Commissioner of Income-tax (Appeals) as well as
the Income-tax Appellate Tribunal have also concluded that the said
amounts received by the assessee were in the nature of capital receipts.
We agree with that conclusion because the amount was received by
way of compensation for not being offered the job on the basis of
ITA Nos.1348/08 & 1386/2008 Page No.6 of 7
gender discrimination. The decision of the tribunal, therefore, does not
call for any interference.
7. No substantial question of law arises for our consideration.
The appeals are dismissed.
BADAR DURREZ AHMED, J
RAJIV SHAKDHER, J
December 12, 2008
dutt
ITA Nos.1348/08 & 1386/2008 Page No.7 of 7