TMI Blog1955 (9) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... y under section 66(1) of the Indian Income-tax Act, 1922. 2. The assessment year is 1951-52, the relevant accounting year being the calendar year 1950. The assessee is a registered firm constituted of 20 partners. The following are 3 out of the said 20 partners:- 1. Madanmohan Mangaldas. 2. Madhusudan C. Parekh. 3. Indrajit Chamanlal Parekh. These 3 partners were directors of Girdhardas Harivallavdas Mills, Ltd. Under a managing a agency agreement dated 7th September, 1940, the assessee firm was appointed as its managing agents. Under clause 2(b) of the agreement the assessee was entitled to a commission of 3 % on the sale proceeds of all cotton yarn and cotton cloth manufactured and sold by the managed company and the commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to fix such a lesser remuneration either by way of a lump sum or a reduced percentage for any of these two years and the agents shall be bound to accept such lesser remuneration so fixed by the directors of the company for any of these two years. This resolution was accepted by the assessee and a letter of the same date was sent to the managed company and it was agreed that, in pursuance of the said resolution and the acceptance thereof by the assessee, necessary variation in the managing agency agreement would be made in due course. A copy of this letter is annexure 'B' and forms part of the case. 4. Accordingly, on 17th March, 1951, a supplemental agreement was entered into between the managed company of the one part and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment and the assessee as to the taxability of the sum of ₹ 1 lac, being the difference of the two items of commission stated above. The Department held that the entire sum of ₹ 2,05,575 was the assessee's income it having accrued or arisen to it as commission during the previous year for the assessment year under consideration and the mere voluntary surrender of the sum of ₹ 1 lac or the mere acceptance of the lesser amount of ₹ 1,05,575-3-0 would not in any way affect the taxability of the total sum of ₹ 2,05,575-3-0 in the hands of the assessee. 7. In second appeal before the Tribunal the contention of the assessee that only a commission of ₹ 1,05,575-3-0 accrued or arose to the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement of the case has been left out. The parties agree to the statement of the case as finalised and submitted. The Advocate-General withG. N. Joshi, for the Commissioner N. A. Palkhivala with Sir J. B. Kanga, for the assessee JUDGMENT CHAGLA, C.J.- The very short question that arises for our decision on this reference is: what was the income of the assessee company in respect of the managing agency commission earned by it for managing the managed company, the Girdhardas Harivallavdas Mills? The assessees were appointed the managing agents under an agreement dated the 7 th September, 1940, and they were entitled to a commission of 3?% on the sale proceeds of the mills. On the basis the commission of the managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be made between the assessee company and the managed company and pursuant to this agreement an agreement was arrived at on the 17th March, 1951, a where this resolution passed by the managed company was embodied in the managing agency agreement. On the 8th April, 1951, a meeting of the board of directors resolved that in accordance with the resolution passed by the extraordinary general meeting and also in accordance with the agreement of the 17th March, 1951, the managing agents should accept a commission of ₹ 1,05,575-3-0 instead of ₹ 2,05,575-3-0 and thereupon the managing agents received the amount of ₹ 1.05,575-3-0. The contention of the Advocate-General is that under the agreement 3?% commission accrued to the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only on the 8th April, 1951, when the board of directors decided after considering the working of the managed company that the assessee company should receive ₹ 1,05,575-3-0 and not ₹ 2,05,575-3-0 that the right of the assessee company to their commission arose. It would be fallacious to suggest that till the board of directors resolved what commission the managing agents should receive there was any right in the managing agents to receive bay specific amount. Undoubtedly if no resolution of the December 28, 1950, had been passed and the managing agents had not agreed by their letter of the 28th December, 1950, then the right of the managing agents would have been to receive the 3?% under the agreement, but by reason of this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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