TMI Blog1964 (12) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... 1954-55 even though it was surrendered by a resolution passed before the end of the accounting period ? 2. Whether, on the facts and in the circumstances of the case, managing agency commission and office allowance received by the assessee-company from M. G. R. Iron Steel Works Ltd. was income of the assessee-company for the assessment year 1954-55 even though it was surrendered by the assessee-company, just because the resolution surrendering the commission and the allowance was passed after the end of the accounting period ? " These questions have arisen under the following circumstances : The assessee is a private limited company managing other companies as managing agents and also doing business in minerals. The assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Officer. The Appellate Tribunal, however, partly allowed the appeal of the assessee, holding that, in respect of the first four companies, the assessee-firm was entitled to deduction of the managing agency commission and rejecting the other contentions of the assessee in respect of other claims. Mr. Sankar Ghosh, learned counsel for the assessee, has challenged the decision of the Appellate Tribunal on the following grounds : 1. The office allowance amounting to Rs. 18,000 receivable by the assessee from M/s. Rungta Engineering Construction Co. Ltd., Orient Industrial Engineering Co. Ltd., Bengal General Trading Co. Ltd. and Orient Potteries Ltd. in the accounting year ending on July 11, 1953, but relinquished by the company's resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressed its desire to resign from the managing agency and to have the two private limited companies appointed on the same term. The assessee at this stage agreed to forgo the previous rate of 100 % and accept a reduced rate of 2 1/2 % of the total freight. On December 30, 1947, at the extraordinary general meetings of the managed companies the two private limited companies were appointed as managing agents with effect from January 1, 1948. The relevant accounting year ended on March 31, 1948, and, thereafter, at the annual general meetings of the two managed companies held in December, 1948, the commission was formally reduced from 100 % of the freight to 2 1/2%. As a result the assesseefirm gave up 75 % of its earnings during the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account ... Here too, the agreements within the previous year replaced the earlier agreements and altered the rate in such a way as to make the income different from what had been entered in the books of account. A mere book-keeping entry cannot be income, unless income has actually resulted and, in the present case, by the change of the terms the income which accrued and was received consisted of the lesser amounts and not the larger. " Mr. Ghosh has argued that following the same principle the Income-tax Officer should have held the office allowances payable to M/s. Rungta Engineering Construction Co. Ltd., Orient Industrial E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to clause 3(ii) should equally govern clause 3(i) and, as such, the office allowance is also payable and can only accrue at the end of the year. As the office allowance has been given up within the accounting year, he has submitted, that, like the claim in respect of commission, the office allowance also has not accrued within the accounting year and, as such, should not be made taxable. In our opinion this contention cannot be accepted. Clause 3 of the agreement clearly provides that the agency company will be entitled to receive commission in the shape of office allowance of Rs. 500 per month and a commission of 100 % of the net yearly profits which in no case would be less than Rs. 6,000 for the whole year. The proviso specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uance of its resolution dated 30th September, 1953. Mr. Ghosh has frankly stated that there is nothing to show that in the relevant previous year ending on July 11, 1953, there has been any root or germ which would be referable to the assessee's subsequent decisions relinquishing the office allowance and the commission in September, 1953. Adopting the principles laid down in the aforesaid Supreme Court cases, Commissioner of Income-tax v. Shoorji Vallabhdas and Co. and Rangta Sons Ltd. v. Commissioner of Income-tax, we hold that the said sum of Rs. 6,000 has already accrued within the previous year and, as such, has rightly been included in the total income of the assessee. In view of the above Supreme Court decision and our construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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