ITEM NO.7 COURT NO.5 SECTION IIIA SUPREME COURT OF INDIA RECORD OF PROCEEDINGS PETITION(S) FOR SPECIAL LEAVE TO APPEAL (C) NO(S). 1196-1197/2013 (ARISING OUT OF IMPUGNED FINAL JUDGMENT AND ORDER DATED 25/07/2012 IN TCA NO. 225/2006 AND TCA NO. 226/2006 PASSED BY HIGH COURT OF MADRAS) IAN PETER MORRIS PETITIONER(S) VERSUS ASSTT. COMMNR. OF INCOME TAX RESPONDENT(S) (WITH INTERIM RELIEF AND OFFICE REPORT) Date : 29/11/2016 These petitions were called on for hearing today. CORAM : HON'BLE MR. JUSTICE RANJAN GOGOI HON'BLE MR. JUSTICE N.V. RAMANA For Petitioner(s) Mr. Dhruv Agarwal, Sr. Adv. Ms. Shruti Agrawal, Adv. Mr. Abhinav Mukerji, Adv. For Respondent(s) Mr. K. Radhakrishnan, Sr. Adv. Ms. Rashmi Malhotra, Adv. Mr. Deepak Prakash, Adv. Ms. Shruti Srivastava, Adv. Mrs. Anil Katiyar, Adv. UPON hearing counsel Court made following ORDER appeals are allowed in terms of signed order. [VINOD LAKHINA] [TAPAN KR. CHAKRABORTY] COURT MASTER COURT MASTER Signature Not Verified Digitally signed by VINOD LAKHINA Date: 2016.12.02 16:37:48 IST [SIGNED ORDER IS PLACED ON FILE] Reason: 1 IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.11385-11386 OF 2016 [Arising out of Special Leave Petition (Civil) No.1196-1197/2013] IAN PETER MORRIS ...APPELLANT VERSUS ASSISTANT COMMISSIONER OF INCOME TAX ...RESPONDENT ORDER 1. Leave granted. 2. appellant Assessee along with three others had promoted Company, namely, 'Log in Systems Innovations Private Limited' (the Acquiree Company) in year 1990. said Company was acquired by one Synergy Credit Corporation Limited (the Acquirer Company). appellant was offered position of Executive Director 2 in Acquirer Company for gross compensation of Rs.1,77,200/- per annum. This was by appointment order dated 8th October, 1993. On 15th October, 1993, Acquisition Agreement was executed between Acquirer Company and Acquiree Company on going concern basis for total consideration of Rs.6,00,000/-. On same date i.e. 15th October, 1993, Non-Compete Agreement was signed between appellant Assessee and Acquirer Company imposing restriction on appellant from carrying on any business of Computer Software development and marketing for period of five years for which appellant Assessee was paid sum of Rs.21,00,000/-. question that arose in proceedings commencing with Assessment Order is whether aforesaid amount of Rs.21 lakhs is on account of 'salary' or same is 'capital 3 receipt'. High Court in order under appeal took view that said amount is 'salary amount' on which interest would be chargeable/leviable under Section 234B and 234C of Income Tax Act, 1961 (for short Act ). Aggrieved, present appeal has been filed. 3. limited notice was issued in present case confining scrutiny of Court to correctness of levy of interest as ordered/affirmed by High Court. aforesaid limited notice, therefore, has to be understood to have concluded issue with regard to nature of receipt, namely, that same was salary. 4. perusal of relevant provisions of Chapter VII of Act [Part A, B, C and F of Chapter VII] would go to show that against salary deduction, at requisite rate at which income tax is 4 to be paid by person entitled to receive salary, is required to be made by employer failing which employer is liable to pay simple interest thereon. provisions relating to payment of advance tax is contained in Part 'C' and interest thereon in Part 'F' of Chapter VII of Act. In cases where receipt is by way of salary, deductions under Section 192 of Act is required to be made. No question of payment of advance tax under Part 'C' of Chapter VII of Act can arise in cases of receipt by way of 'salary'. If that is so, Part 'F' of Chapter VII dealing with interest chargeable in certain cases (Section 234B Interest for defaults in payment of advance tax and Section 234C Interest for deferment of advance tax) would have no application to present situation in view of finality that has to be 5 attached to decision that what was received by appellant assessee under Non-Compete Agreement was by way of salary. 5. For aforesaid reasons, appeals are allowed; order of High Court so far as payment of interest under Section 234B and Section 234C of Act is set aside. ....,J. (RANJAN GOGOI) ....,J. (N.V. RAMANA) NEW DELHI NOVEMBER 29, 2016 Ian Peter Morris v. Assistant Commissioner of Income-tax