Assessee was employed with a company in capacity of Chief Operating Officer. In terms of employment agreement, apart from yearly compensation, assessee was also entitled to sweat equity. However, employment of assessee was terminated. Thereafter, assessee approached CLB seeking for appropriate directions being framed requiring company to register shares in his name.During pendency of aforesaid petition before CLB, assessee and company agreed to settle all disputes and signed a settlement agreement.In terms of settlement agreement, assessee unconditionally and irrevocably relinquished all his rights in respect of registration of shares held by him and to consequently hand over share certificates in original to company. Assessee filed his return of income declaring said settlement amount as long-term capital gains. Assessing Officer held that said amount represented ‘profits in lieu of salary’, received in lump sum after cessation of employment and, thus, was liable to be taxed under head salaries. On appeal, the Commissioner (Appeals) held that the amount of Rs. 3.03 crores was chargeable to tax as ‘capital gains’ and not under the head of ‘salaries’. On further appeal, the Tribunal held that the 15,000 eligible shares alone should be treated as taxable under the head ‘capital gains’ while the balance 35,000 shares should be taxed in accordance with the provisions of section 17(3)(iii).  On appeal the Court held that  the  settlement amount was received by assessee in lieu of relinquishment of his right to seek registration of shares. Settlement consideration was not liable to be construed as payment connected to termination of assessee’s employment. Further, in petition, which was filed before Company Law Board, there was no relief which was sought with respect to cessation of employment of assessee or validity of termination of employment. On facts, settlement amount received by assessee was liable to be recognised as capital gains and not profits in lieu of salary. Order of Tribunal was set aside. (AY. 2014-15)