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TMI Blog1972 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 per cent. of the annual net profit of the company, and (ii) salary of Rs. 5,000 per month. Besides these, he was also entitled to receive bonus as and when it was declared. For the year in question, the commission at the aforesaid rate worked out to Rs. 44,116 and the salary was Rs. 60,000. The assessee would have also been entitled to a sum of Rs. 15,000 as bonus for the year in question. Thus, the three amounts put together came to Rs. 1,19,118. The amount was taxed in the hands of the assessee, although his case before the department was that he had forgone his commission, salary and bonus on account of the company being in financial difficulties. It was contended by the assessee that inasmuch he had forgone these amounts, the same never accrued to him or arose to him and so could not be regarded as his income during the relevant year and no tax could be assessed on this amount. The Income-tax Officer was of the view that the financial condition of the company was not such as required the assessee to forgo his salary, commission and bonus and that these amounts did accrue to the assessee on which he was liable to pay tax. On appeal, the Appellate Assistant Commissioner confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of, the Government, a local authority, a company or any other public body or association, or any private employer; and for the purposes of this sub-section advances by way of loan or otherwise of income chargeable under this head shall be deemed to be salary due on the date when the advance is received." The admitted facts in the case are that the assessee was the managing director of Messrs. Punjab Distilling Industries Ltd. and his remuneration according to the agreement executed between him and the company were as noticed above; that for the relevant year the assessee did not receive and the company did not pay anything towards salary, commission or bonus ; that the fact of the assessee giving up his salary, commission and bonus for the relevant year was recorded in a resolution of the company as embodied in the minutes of the meeting of 20th January, 1951; and the directors' report for the relevant financial year mentioned that "the managing director has generously offered to forgo not only the commission and bonus for the year but also his sala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees was taxable in the hands of the employees. On a construction of the rule of the scheme, it was held that until an employee attained the age of superannuation, he did not acquire any vested right in the employer's share of the contributions towards the premiums and, at best, he had a contingent right therein. So, whether the employer's contribution was a perquisite within the meaning of section 7(1) of the Act and thus taxable depended upon when the vested right was acquired by the employee. This vested right was only in respect of such sums which the employer was under an obligation to pay and the employee had a right to claim; it could not apply to contingent payments to which the employee had no right till the contingency occurred. The employer's contributions towards premiums were not perquisites allowed to the employee by the employer or amounts due to him from the employer within the meaning of section 7(1) read with clause (v) of the Explanation thereto. The ratio of the decision, therefore, is that payment by itself is immaterial and it is the right to claim payment which is the guiding factor. This right may arise in different contingencies at different points of time. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g agent of its subsidiary company. The assessee was entitled to receive an office allowance of Rs. 1,000 per month, a commission at 12 1/2 per cent. of the net profits of the managed-company and an additional commission of 1 1/2 per cent. on all purchases of cotton and sales of cloth and yarn. In the accounting years ended on 31st December, 1954, and 31st December, 1955, the managed-company suffered losses and the assessee earned only commission on the sale of cloth and yarn for the two years. The total amounts including the office allowance which the assessee was entitled to receive were Rs. 50,719 and Rs. 13,963 for the two years. Under clause 2(e) of the managing agency agreement, the commission was due to the assessee on 31st December, 1954, and 31st December, 1955, respectively, and it was payable immediately after the annual accounts of the managed-company had been passed in the general meetings which were held on 24th November, 1955, and 21st July, 1956, respectively. By resolutions of its board of directors dated, respectively, April 4, 1955, and June 19, 1956, that is, after the commission had become due but before it had become payable in terms of clause 2(e), the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . But, when the contract, though in respect of work terminating at a particular time, is to be construed as providing that remuneration shall accrue due and become vested at stated periods, such remuneration constitutes a debt recoverable at the end of each such period of service." Bhagwati J. also observed that: " Section 219 of the Indian Contract Act also provides that in the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of such act." Relying on this rule, it was urged that inasmuch as the salary of Rs. 5,000 became due and claimable month by month, the sum of Rs. 60,000 representing the salary for the whole year was taxable as income. The word "income" has not been defined in the Income-tax Act but as was noticed in E. D. Sassoon's case, the Privy Council in Commissioner of Income-tax v. Shaw Wallace & Co., attempted a definition of the term income in the following words: " Income, their Lordships think, in the Indian Income-tax Act, connotes a periodical monetary return 'coming in' with some sort of regularity, or expected regularity from definite sources. The source is not necessarily one which is expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precedent to their being entitled to receive the remuneration or commission stipulated thereunder no debt payable by the companies was created in their favour and they had no right to receive any payment from the companies. No remuneration or commission could, therefore, be said to have accrued to them at the dates of the respective transfers." The argument in E. D. Sassoon's case that commission could not be ascertained till the accounts were made up and so could be said to accrue only when the accounts were made up did not find favour with the court. It was held that accrual of income does not depend on its ascertainment or the accounts cast by the assessee. Or, in other words, computation of the profits has nothing to do with accrual thereof. The above decision was followed by this court in Shri Ram Pershad v. Commissioner of Income-tax, and we are informed that the decision has been affirmed by the Supreme Court. Mr. Sharma also invited our attention to the decision in Smyth v. Stretton and Parkins v. Warwick. The principle enunciated in these cases is the same as in E.D. Sassoon's case. Thus, as observed by us earlier, the question for determination is as to when did the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o behind or to question the statements of fact made by the Tribunal. The statement of the case is binding on the parties and they are not entitled to go behind the facts found by the Tribunal in the statement." Mr. Manchanda urged that in view of the decision in the above case, all that we are entitled to see is the statement of the case and not the orders of any other authority as is contended by Mr. Sharma. In Praise & Co. Ltd. v. Commissioner of Income-tax a Bench of the Calcutta High Court had taken the view that the orders of the Appellate Assistant Commissioner and the Income-tax Officer can be looked into and reliance in this behalf was placed by the Bench on the decision of the House of Lords in Griffiths v. J.P. Harrison (Watford) Ltd. Praise & Co. had really followed an earlier Bench decision of the Calcutta High Court in Humayun Properties Ltd. v. Commissioner of Income-tax. In Keshav Mills Co. Ltd. v. Commissioner of Income-tax the Supreme Court had observed as under: " It is clear that when the Tribunal draws up a statement of the case and refers a question of law to the High Court under section 66(1), the said question must arise out of its order, and the statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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