TMI Blog1961 (10) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... d on December 1, 1952, and the terms agreed upon between the parties were incorporated in two instruments of date 29th September, 1953. We would deal with the relevant terms of these agreements at a later stage. It is sufficient at this stage to say that compensation amounting to ₹ 96,000 and ₹ 48,000 respectively in half-yearly instalments or ₹ 6,000 and ₹ 3,000 were payable to the assessee subject to certain terms and conditions mentioned in the agreements. The payment of instalments commenced from July 1, 1953. In pursuance of these terms, the assessee received ₹ 12,000 and ₹ 6,000 respectively under these two agreements and the dispute is as to the chargeability to tax of the said amounts of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in expect of the said sums of ₹ 12,000 and ₹ 6,000 under section 10(5A) of the Act. On an application by the assessee under sub-section (1) of section 66 the Tribunal has drawn up a statement of case and has referred to as the following question of Law : Whether, on the facts and in the circumstances of the case, the two amounts of ₹ 12,000 and ₹ 6,000 received by the assessee from the two respective principals during the previous year under the agreements dated September 29, 1953, are taxable under section 10(5A) of the Indian Income-tax Act ? 2. Section 10(5A) of the Act was introduced in the statute book by section 8 of the Fiance Act of 1955 with effect from 1st April, 1955. The portion material to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be clause (c). There is no doubt that payment of ₹ 12,000 and ₹ 6,000 had been received by the assessee in the assessment year. The only question, therefore, that falls for consideration in this case is whether the payments were received by the assessee by way of compensation for the termination of its services or in connection with the termination of the agencies. 4. Mr. Palkhivala contends that on a proper construction of the agreements between the principals and the assessee, the entire amount of compensation of ₹ 96,000 and ₹ 48,000 became due to the assessee on September 29, 1953, there date on which these agreements were executed. The entire income this accrued to the assessee at that time and the accrual i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore, deal with the agreement relating to that termination of the managing agency of the assessee of General Superintendence Co. (India) Ltd. It is annexure B to the statement of the case. Clause (1), provides that from 1st December, 1952, the principal will cease to employ the assessee company to handle its business in Bombay and it will be taken over by the principal itself. Clause (2) (a) is in the following terms : To compensate F. E. Hardcastle Co. Ltd., Bombay, for the loss of employment mentioned in clause I, GSC(1) Bombay will (subject to observance of clauses 4, 5 and 6) pay to F. E. Hardcastle Co. Ltd., Bombay, the sum of ₹ 48,000 (forty-eight thousand) (without interest) by sixteen equal six monthly instal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (three) further warnings the penalty will increase to 3 (three) times the amount of the fees collected. If, notwithstanding the above, deliberate competition in this business with GSC (I) Bombay-SGS continues, then the latter have the right to stop payment of all or part of the outstanding indemnities (provided) by clause (2) of the present agreement. 7. Clause (8) provides for arbitration in case of dispute and clause (9) provides that the agreement is subject to Swiss law. Having regard to these material terms of the agreement, it is difficult to hold that the entire amount of ₹ 48,000 accrued due to the assessee on the date of the agreement i.e., 29th September, 1953. The principal company has agreed to pay this amount to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be paid were only by way of repayment of that debt, then the agreements would not have mentioned the unpaid amount of the instalments as outstanding indemnities . 8. Mr. Palkhivala contends that though the use of the expression outstanding indemnities in clause (7) indicates that the character of the instalments is payment of compensation, yet having regard to the other terms of the contract, it is nothing but repayment of a debt. According to Mr. Palkhivala, non-observance of the conditions in clauses (4), (5) and (6) only resulted in forfeiture of accrued income, which had remained to be paid to the assessee. It is difficult to put such a construction on the clause. Apart from the expression outstanding indemnities , in the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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