9911796707
TMI Blog1967 (7) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... f offices and godown, turnover rebates and contingency expenses, etc." The terms relating to commission were modified by agreement dated August 20, 1935, and out of the commission agreed to be paid, 7 1/2% was to be treated as the selling commission and 5% was to be treated as compensation in lieu of the contingency expenses which the selling agent had to meet, " such as commission to dyeing-masters, agents, etc. " The rights of the selling agent were assigned with the consent of the principals to the respondent company with effect from October 27, 1947. In assessing the income of the company for the assessment year 1949-50, the Income-tax Officer included in the taxable income Rs. 58,025, being the difference between Rs. 1,90,538 receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same agency agreement. It appears that in so observing the court was under some misapprehension for the question referred by the Tribunal had not been decided in the earlier judgment. Against the order passed by the High Court recording an answer in the affirmative on the question referred by the Tribunal and against the order dismissing the notice of motion, the Commissioner appealed to this court. This court set aside the order passed by the High Court dismissing the application of the Commissioner and without expressing any opinion on the correctness or otherwise of the answer recorded by the High Court on the question referred by the Tribunal, remanded the case to the High Court with a direction that the Tribunal be called upon to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for exemption, the allowance must, it is clear, be granted to meet expenses incurred or to be incurred wholly and necessarily in the performance of the duties of an office or employment of profit. But the purpose for which the allowance is granted, in our judgment, is alone not determinative of the claim to exemption. An allowance, though made to a person holding an office or employment of profit, intended for appropriation towards expenditure incurred or to be incurred in the discharge of the duties, does not constitute any real income of the grantee. It is in truth expenditure incurred by the employer through the agency of the grantee. The intention of the framers of the Act was to grant exemption in respect of amounts received by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for that particular purpose, it is no longer necessary for the assessee to prove that in fact he expended that grant for the purpose for which it was given. He may spend more, or he may spend less, but qua that grant which is given for a particular purpose, he is entitled to the exemption," do not, in our judgment, give due effect to the key words " to meet expenses wholly and necessarily incurred in the performance of the duties of an office or employment of profit." What is exempted is not the consideration paid for meeting the expenditure incurred or to be incurred in the performance of the duties of an office or employment : the exemption operates only in respect of a special allowance or benefit specifically granted to meet expenses wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the Income-tax Officer may under the Act exempt expenditure incurred in the year of account and no more, and thereby the intention of the employer would be wholly frustrated and the employee may be called upon to pay tax on a receipt which is not his income. The expression " incurred " means for reasons already set out incurred or to be incurred. But that has no bearing on the question whether the unexpended surplus in the hands of the employee is taxable. And we do not feel impressed by the second consideration. The allowance may be in respect of a period longer than the accounting year or which runs into the succeeding accounting year or years. But on that account the whole receipt reduced by the expenses actually incurred in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement with the principals holds an employment for profit. No argument to the contrary was advanced before us. It is unnecessary therefore to consider the elaborate judgment of the High Court on the question whether the selling agent holds an office within the meaning of section 4(3)(vi) of the Act. The appeal is therefore allowed and the answer recorded by the High Court to the supplementary question is discharged, and the following answer to the supplementary question is recorded : " That portion of 5% of the selling agency commission received by the assessee company is exempt under section 4(3)(vi) of the Income-tax Act, 1922, which is wholly and necessarily incurred in the year of account in the performance of the duties of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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