1. ABDUL KADIR SHAIKH, J.--This is a petition for leave to appeal from the judgment of Sind High Court, dated 18-8-1983 by which the following question referred to it under section 66(1) of the Income-tax Act, 1922 was decided in the affirmative:- "Whether in the facts and circumstances of the case the Tribunal was justified in holding that the separation allowance was received by the assesses as compensation for loss of employment and being a capital receipt is not liable to be taxed."
2. The answer of the High Court was based on its earlier decision in Commissioner of Income-tax v.
3. M.A. Toor 1984 PTD 368, which involved identical facts and circumstances.
4. Facts of the present case briefly stated are that the respondent was an employee of the General Motors Overseas Corporation, Karachi during the assessment year 1963-64, and he received Rs.48,338 as salary and payment of Rs. 38,743 as 'separation allowance' distributed by the Corporation to its employees on the eve of its cessation of business in Pakistan, with effect from 1- 4-1963 when its entire business was taken over by Ghandhara Industries Ltd. The respondent did not declare this allowance in his return of income on the ground that amount was exempted from tax under Explanation 2 to subsection (1) of section 7 of the Act, as it then stood. However, the Income-tax Officer included the amount in the total income of the respondent treating it as his remuneration for the past services on the ground that the terms of respondent's employment with the Corporation did not include any payment for the benefit on termination of his service, except for one month's salary in lieu of notice. He further held that since the respondent was given employment by Ghandhara Industries Ltd. On the terms and conditions identical to those of the Corporation, there was no actual loss of employment to respondent.
5. In appeal, the Appellate Assistant Commissioner held the separation allowance received by respondent as compensation of loss of employment not liable to tax. The appeal to the Income-tax Tribunal against the order of the Appellate Assistant Commissioner was dismissed, and the aforesaid question was then referred to the High Court under section 66(1) of the Income-tax Act, 1922 at the instance of the department, which was answered in the affirmative, as stated earlier.
6. Before the Tribunal, reference was made on behalf of the department to Explanation 2 to subsection (1) of section 7 of the Act, according to which any payment due to or received by an assessee from an employer or former employer is a profit received in lieu of salary for the purpose of subsection, unless, however, the payment is made solely as compensation for loss of employment. It was, therefore, argued before the Tribunal that unless it could be established that the payment was made solely as compensation for the loss of employment it must be held as income taxable under the head "Salaries" as provided in section 7 of the Act. Explanation 2 to section 7(1) of the Act provides as under:- "Explanation 2.-- A payment due to or received by an assessee from an or former employer or from a provident or other fund is to the extent to which it does not consist of contributions by the assessee or interest on such contribution a profit received in lieu of salary for the purposes of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services."
7. On the basis of the evidence produced the Tribunal held that "there could be no room for suspicion that the assessee had lost his employment with M/s. General Motors who paid the separation allowance in question only in connection with that loss". The Tribunal further held that the separation allowance was not received as a remuneration for the past services. In this regard, there was evidence on record that what was given as separation allowance was by way of bargain or settlement of certain outstanding disputes under section 5(3) of the Industrial Disputes Ordinance, 1959 read with- rule 57 of the Rules made thereunder; this position being recited in the Memorandum of Settlement between M/d. General Motors Overseas Corporation, Karachi Branch and General Motors Employment Union, Karachi, dated 15th March, 1963 signed by the representatives of both the employees and employer." The High Court on reappraisal of the evidence upheld these findings and further held that the respondent was a permanent employee which position was not even questioned before it in any manner.
8. Mr. Waheed Farooqui, learned counsel appearing in support of this petition for leave to appeal from the judgment of the High Court merely repeated the arguments that were advanced before the High Court but since we find that the High Court after duly appreciating all these submissions has answered the question referred to it under section 66(1) of the Income-tax Act, 1922 in the affirmative on the basis of correct factual and legal position under the law, there is no valid justification for interference by this Court. The petition is accordingly dismissed.