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Govindram Ramnath & Co., Bombay Versus Commissioner of Income-Tax (Central) , Bombay

Income-Tax Reference No. 10 of 1952 - Dated:- 10-10-1952 - Chagla (CJ) And Tendolkar, JJ. For the Assessee : Sir Jamshedji Kanga with Javeri, For the Commissioner : Sir N. P. Engineer with G. N. Joshi JUDGMENT Chagla, CJ. The question that arises in this reference is as to the true construction of Section 12A of the Income-tax Act. The assessee is a firm and in the relevant years of account it acted as the managing agents of Seksaria Sugar Mills Ltd. The assessee firm entered into an agreement o .....

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ralal agreeing to give him 1 anna instead of 2 annas share jointly to Hiralal and Ramsarup. The assessee firm was assessed in Bombay for the first time in 1942-43 and no claim was made by the assessee firm under Section 12A. The claim was made under Section 12A in the assessment year 1943-44 and a proper declaration as required by Section 12A was filed. A claim was also made for the assessment year 1944-45. The assessment of that year was completed on the 29th July, 1948, and the declaration und .....

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agent of a company is liable under an agreement made for adequate consideration to share managing agency commission with a third party or parties, the said agent and the said party or parties shall file a declaration showing the proportion in which such commission is shared between them, and on proof to the satisfaction of the Income-tax Officer of the facts contained in such declaration such agent and each such party shall be chargeable only on the share to which such agent or party is entitled .....

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the declaration at any time subsequent to the filing of the declaration, but there is no obligation whatever cast upon the assessee to file a declaration every year for the purpose of every assessment. It is clear on the language of the section that the declaration has to be filed before the assessment is completed because the Income-tax Officer has got to be satisfied of the facts contained in the declaration. But what is contended is that the declaration having been filed in time for the asse .....

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endure for the benefit of the assessee in subsequent years of assessment. Every assessment being self-contained, the declaration lapses with the completion of the assessment, and if the assessee again desires to have the benefit of Section 12A he must apply for it in the manner laid down in Section 12A. It was suggested by Sir Jamshedji that if there is an agreement under which there is a liability upon the assessee to share the commission for a certain number of years, it ought to be sufficient .....

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the sharer carrying out certain obligations, and every time a difficult question would arise whether an agreement filed with a declaration covered clearly an obligation on the part of the assessee to share the commission not only during the year of assessment but also in subsequent years. In this very case the agreement to share is conditional, conditional upon the parties who share the commission holding shares of a certain value in the company. Further, the language used by the Legislature als .....

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got to satisfy the Income-tax Officer of the proportion in which the commission is shared between him and the sharer, and it seems that he must satisfy the Income-tax Officer with regard to this proportion each time he claims an exemption and not generally with regard to future assessment years. Support is lent to this argument also by the view taken by our Court on a construction of Section 43. In that case there is an obligation cast upon the Income-tax Officer to cause a notice to be served .....

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e Kania, as he then was, pointed out that the assessment for each year is self-contained and therefore the contention that once a notice is served on the party and he is held to be an agent such decision is good for all times unless the party himself moves and takes steps to get that decision set aside, is not correct. Section 43 dealt with the obligation of the Income-tax Officer when he sought to impose a liability upon a person. Section 12A deals with the right of the assessee to claim a cert .....

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a person under an agreement for adequate consideration. Therefore, in our opinion, the Tribunal was right in the view that it took that the declaration filed by the assessee firm for the assessment year 1943-44 did not endure for subsequent years. We should like to say a word about the declaration filed by the assessee firm for the year 1944-45. As already pointed out, that declaration was out of time by about 21 days. In our opinion the Appellate Assistant Commissioner on appeal could undoubte .....

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filed thereafter, there is nothing to prevent, in proper cases, the Appellate Assistant Commissioner from asking the Income-tax Officer to take the declaration into consideration and then assess the assessee. The Appellate Assistant Commissioner himself cannot consider the declaration because Section 12A requires the Income-tax Officer to be satisfied with regard to the proof of the facts contained in the declaration. We do not say that in every case where there is delay in filing the declarati .....

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ration the declaration filed by the assessee and would consider the desirability of giving the necessary relief to the assessee firm. A notice of motion has been taken out by the assessee firm to raise a further question which they say arises out of the order of the Tribunal, and the further question suggested is that the amount shared by the assessee firm with other parties of the commission received by it should be allowed as a permissible deduction under Section 10(2)(xv). Sir Jamshedji says .....

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ut that all that the agreement shows is that there was a certain consideration for the assessee sharing the managing agency commission and the consideration was that the sharer was to have bought shares of the value of ₹ 1,25,000 of the Seksaria Sugar Mills Ltd. and to have retained, throughout the continuance of this agreement, shares of the value of ₹ 10,000. The right of the sharer to receive his share was conditional upon holding these shares of ₹ 10,000. But the Tribunal p .....

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