Amount Paid to ex-Staffs to avoid Litigation is not Profit in Lieu of Salary

Under clause (i) of section 17(3) of the Act, in order to characterise a particular payment received from the employer, on termination of the employment, as “profits in lieu of salary”, it has necessarily to be shown that this amount is due or received as “compensation”. The word “compensation” is not defined under the Act. Therefore, one has to take into consideration the ordinary connotation of this expression in common parlance. It has to be in the nature of something awarded to compensate for loss,suffering or injury. When translated in the context of employment, it would imply...