TMI Blog1962 (7) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... he percentage of profits which the assessee became entitled to in respect of these two branches only. For the assessment years 1946-47 to 1950-51, the mills credited in its accounts the monthly allowance stipulated as well as the 5% profits relating to the head office at Madurai. The profits relating to the Usilampatti and Pudukottah branches were not so credited by the mills in its accounts. In respect of the ascertained but uncredited profits of the two branches, assessments were made by the Income-tax Officer. In the appeals to the Appellate Assistant Commissioner, the assessee contended that it must be assessed only on the income actually received. It was urged that the percentage due on the profits of the two branches was in dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier agreement. Relying upon this decision, the Tribunal held that the income did accrue to the assessee. On the application of the assessee under section 66(1) of the Act, the Tribunal referred the following question for the decision of this court: Whether the commission of 5% on the profits of Usilampatti and Pudukottah branches of Sree Meenakshi Mills Limited has accrued due to the assessee on the agreement dated 14th March, 1945, notwithstanding the failure of the mills to adjust it in their books so as to be assessable in the hands of the assessee for the assessment years 1946-47 to 1950-51? Sri Padmanabhan, learned counsel for the assessee, has rested his arguments on practically a solitary ground, viz., that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. The short question that arises therefore is whether under the terms of this agreement the assessee did not become entitled to the amounts in question. Clause 7 places a liability on the company to pay five per cent. of the annual net profits of the company, obviously after it is ascertained. But the ascertainment of these net profits, as we have pointed out, is admitted by the learned counsel for the assessee to have been made immediately at the close of the relevant accounting year. Undoubtedly, therefore, the clauses create a corresponding right in the assessee to receive the amount when once the profits have been ascertained. The question then is whether by reason of the failure of the mills to make the necessary credit entries i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken and the profit and loss ascertained on the Deewali day of each year. The minor son who had become a partner died on 31st August, 1950, and his share in the profits was ascertained as on that day. The department calculated the proportionate profits up to the 20th August, 1950, and sought to include that amount in the assessment of the father under section 16(3) of the Act. The decision was that since the profits were ascertained only on the Deewali day of each year, it was impossible to predicate whether the partnership had made any profit or loss on any day prior to the Deewali date and that the deceased son had not acquired any right to receive any amount from the partnership as profits at any time during the accounting year. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te on such part of it as remained unpaid. There were several payments of the legacy, but he had received no interest and had made no election as to whether or not he would claim interest from the estate. In an appeal against the inclusion in an assessment for sur-tax made on him on a sum receivable as interest on the legacy, the Special Commissioners decided that the voluntary forgoing by the appellant of the interest which he had a right to receive should be regarded as an application of the interest and was therefore correctly included in the assessment. On appeal, the King's Bench Division held that as the assessee had not received any interest in respect of the legacy, no amount could be included as such interest in computing the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med and the clause also stipulated that this amount was payable to the managing agents on the ascertainment of the net profits at the close of the year, a right to receive that amount is created in favour of the managing agent at the same time as liability to pay fastens upon the managed company. If that is so, we are unable to see how it can be said that there has been no accrual of income till the managed mills chooses to enter in its accounts the amount by way of credit in favour of the managing agents. Even on general considerations, it seems to us that there is hardly any room for doubt that the commission which became ascertained on the 31st March of each of these years was income which accrued to the assessee. Mr. Padmanabhan, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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