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TMI Blog1968 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the remaining 2,507 shares, 2,500 shares were held by another private limited company incorporated in India and having its registered office in New Delhi and the remaining 7 shares were held by seven individuals. The shares of the assessee are not quoted on the stock exchange anywhere in India. There is nothing, however, in its memorandum and articles of association placing any restriction on the free transfer of its shares. The assessee entered into a partnership on April 20, 1950, with a firm called " The India Steel Syndicate." There was a reconstitution of this firm on December 2(sic), 1950. The shares of profit of the assessee from this firm (which was registered under section 26A of the Act) as up to November 30, 1950, and up to March 31, 1951, totalling Rs. 70,895 were included in the assessment of the assessee for the assessment year 1951-52. During the assessment years 1950-51 and 1951-52, for which the previous years ended on September 30, 1949, and September 30, 1950, the Income-tax Officer determined the assessable income of the assessee at Rs. 60,350 and Rs. 93,884, respectively. After deduction of the taxes payable, the balance was Rs. 35,834 in the first year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral meeting are less than sixty per cent. of the assessable income of the company of that previous year, as reduced by the amount of income-tax and supertax payable by the company in respect thereof he shall, unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made, the payment of a dividend or a larger dividend than that declared would be unreasonable, make with the previous approval of the Inspecting Assistant Commissioner an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income-tax purposes and reduced by the amount of income-tax and supertax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the shareholders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purpose of assessing his total income : Provided that when the reserves representing accumulations of past profits which have not been the subject of an order under this sub-section excee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion 'previous year' as then applicable to him except with the consent of the Income-tax Officer and upon such conditions as the Income-tax Officer may think fit to impose; or ... (ii) in respect of the share of the income, profits and gains of a firm where the assessee is a partner in the firm and the firm has been assessed as such, the period as determined for the assessment of the income, profits and gains of the firm ; ....... " On behalf of the appellant the Attorney-General put forward the argument that the High Court was in error in holding that the sum of Rs. 70,895 which was the assessee's share of income in its partnership with the Indian Steel Syndicate should be left out of consideration so far as the assessment year 1951-52 was concerned. It was pointed out that the assessee had two different sources of income : (1) from its own business, and (2) from the share of the partnership business with the Indian Steel Syndicate and that under section 2(11) of the Act the assessee must be deemed to have two previous years with regard to two different sources of income. It was therefore argued that the High Court was in error in holding that the income from the partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inesses with two different sources of income for which there are separate accounting periods. It follows therefore in the present case that the Income-tax Officer was right in holding that the assessable income of the company included the share of the assessee's profits in its partnership with the Indian Steel Syndicate for the purpose of application of section 23A of the Act so far as the assessment year 1951-52 was concerned. The argument was, however, stressed on behalf of the respondent that in any event the share of the profit of the assessee from the partnership business for the period from October 1, 1950, to March 31, 1951, was not known to the assessee before its annual general meeting on May 17, 1951. It was pointed out that for the first time the Income-tax Officer was intimated on August 11, 1953, that the share of the profit of the assessee in the partnership was to the extent of Rs. 70,895 and should be included in its assessment. After receipt of the intimation the Income-tax Officer rectified the original assessment made on February 29, 1952, and included the said amount of Rs. 70,895. In our opinion, there is no warrant for the argument put forward on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory contracts under which its services were not completed or paid for, as regards commission, until the conclusion of the relevant account; the profit in the form of commission was not ascertainable or earned, and did not arise, until that time and the additional assessment which was made in the year in which the policies were underwritten should accordingly be discharged. The Special Commissioners allowed the assessee's contention and discharged the additional assessment. The decision of the Special Commissioners was confirmed on appeal by Macnaghten J. in the King's Bench Division of the High Court. The Court of Appeal, however, reversed this decision and a further appeal was taken by the assessee to the House of Lords. The House of Lords held that on the true construction of the agreements, the commissions in question were earned by the assessee in the year in which the policies were underwritten, and must be brought into account accordingly and confirmed the decision of the Court of Appeal. At page 96 of the report Lord Wright observed : " I agree with the Court of Appeal in thinking that the necessary conclusion from that must be that the right to the commission is treated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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