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Income-tax Reference No. 544 of 1972, heard on 26^th March, 1984.

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‑‑‑S.7(1), Explanation 2‑‑Separation ‑ allowance‑‑Taxability of Where payment of separation allowance by employer to assessee was not for past services, same, held, was exempt from tax under S.7(1), Explanation(2).

Miss Nuzhat Alvi and Kazim Hussain on behalf of Waheed Farooqui for Appellant.

M.H. Khashwani (absent) for Respondent.

Date of hearing: 26th March, 1984.

Following question has been referred to us by the applicant under section 66(1) of the Income‑tax Act:

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the separation allowance of Rs.9,282 paid to the assessee was not liable to tax under the provisions of Explanation 2 to subsection (1) of section 7 of the Income‑tax Act "

2. Mr. Kazim Hussain appearing on behalf of Mr. Waheed Farooqui, Advocate for the Commissioner of Income‑tax states that a similar question was referred to the High Court in I.T.R. 527/72, but it was answered in the affirmative. Mr. Kazim states that he would canvass for an answer in the negative.

3. We have gone through the judgment of the Division Bench in I.T.R. 527/72, dated 17‑8‑1983, and find that the question referred was dentine to the present question, was in respect of the same year and the facts and circumstances were also identical. After reviewing a large number of judgments of different Courts and on consideration of the relevant rules of employment of General Motors and the correspon dence between the employer and employee and the dispute that had developed between them, the Division Bench of this Court took the view that the payment of separation allowance by General Motors to the assessee in that case was not for past services and was thus exempt from tax under section 7 (1), Explanation (2) of the Income‑tax Act, 1922

4. With respect we agree with the view taken by the Hon'ble Judges in I.T.R. 527/1972, and accordingly this reference is also answered in the affirmative.

M.B.A Answered in the affirmative.

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