TMI Blog1957 (2) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 2,20,433. This contention of the assessee was not accepted by the Taxing Department. The Tribunal decided in favour of the assessees and the Commissioner has now come before us on this reference. The managing agency agreement provides : The remuneration of the agents as such agents of the company as aforesaid shall be as follows : A commission at the rate of three and a half per cent, on the gross proceeds of all sales of the yarn, cloth, waste and other articles manufactured by the company earned in any year or other period for which the accounts of the company are made up and laid before the general meeting. There is a further provision in this agreement, viz., The said commission shall become due to the managing agents at the end of each financial year or other period for which the accounts of the company are to be laid before the general meeting and shall be payable and paid immediately after such accounts have been passed by the general meeting. The contention of the assessee is that inasmuch as the commission is payable on sale proceeds, the commission accrued to Messrs. Shiv-narayan Surajmal Nemani for the period during which they were the manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when we look at the judgment of the Supreme Court that the decision is based not merely on the fact that in Sassoon's case (supra ) the commission was payable on profits. If that had been so, undoubtedly we could have distinguished that case and come to a decision in favour of Mr. Kolah. But when we carefully look at the judgment of the Supreme Court, we find that what the Supreme Court has decided is that the managing agents are entitled to their commission only when a debt is created in their favour. In other words, with respect, the Supreme Court has equated the creation of a debt with the right to receive a certain amount by the managing agents from the managed company. There is great force in Mr. Kolah s argument that there are two distinct stages which have got to be kept in mind; one is the right to receive the payment and the other is when the payment becomes receivable or when a debt is created or when the payment is made enforceable ; and what Mr. Kolah strongly urges upon us is that in this case although the debt may be due by the managed company at the end of the year, although the payment to be received by the managing agents may not be enforceable till the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... managing agents had no right to claim the commission till they had served for the stipulated period, viz., one year, and the rendering of that service for one year was a condition precedent to their right to the commission. This will be clear from the passage at page 37: It was a condition precedent to the Sassoons earning the remuneration that they fulfilled the terms of their employment and completed the period for which the remuneration was payable to them and the service for the particular period was a condition precedent to their earning the remuneration for that period. Again at page 43 it is stated : The commission was thus an annual payment calculated upon the annual net profits of the company and was to be due to the managing agents yearly on the 31st March in each and every year. Therefore, in this sentence the Supreme Court emphasises three aspects of the agreement, viz., that the commission was an annual payment, that it was payable on the 31st of March in each and every year, and the mode of calculation was that it was to be calculated upon the annual net profits of the company. Later on, on the same page there is a further passage : Until and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector serves for a portion of the year his fees could be apportioned. Mr. Kolah wishes to apply the principle of that decision to the facts of this case and he says that although the commission may have accrued at the end of the year in the light of the Supreme Court's decision, inasmuch as it is payable at the rate of 3 per cent, on the sale proceeds, it is capable of being apportioned and therefore it should be apportioned according to the sales effected while Messrs. Shivnarayan Surajmal Nemani were managing agents and for the period when the assessees were managing agents. We would have given serious thought to this aspect of the matter but for the view we take that the decision of the Supreme Court with regard to the question of creation of the debt and with regard-to the serving by the managing agents for a term of one year being a condition precedent for their being entitled to receive payment, is indistinguishable on the facts of this case. We may point out that here as in the Sassoon's case (supra) the commission of 3 per cent, is to be earned in any year, and also by clause 3 of the agreement the commission is to become due to the managing agents at the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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