TMI Blog1955 (8) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... so entitled to a commission of ten per cent. of the company's net profits from the Kanpur branch. It would appear that during one of the relevant assessment years his monthly salary was ₹ 125, but during the remaining three years it was ₹ 150. In the Bengali year ending on the 13th of April, 1940, relative to the assessment year 1940-41, the company credited the assessee in its books with ₹ 47,801 as commission payable to him. Similarly, in the Bengali year ending on the 13th of April, 1941, relative to the assessment year 1941-42, the assessee was credited with a further sum of ₹ 13,401 as commission. The company in its own assessment for the years 1940-41 and 1941-42 claimed these amounts of commission as expenditure and was allowed a deduction. The assessee, however, did not draw the major part of the amounts credited to him, but drew only ₹ 1,200 in the first of the two years and ₹ 4,800 in the second. He had thus a large credit balance in the books of his employer. The next four years are blank as respects commission, because none was earned or credited to his account. In the year ending in April, 1943, however, which was relative to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, the Income-tax Officer included in the assessment an amount of ₹ 2,385 as commission withdrawn and income from other sources. It will be recalled that this amount was the whole of the sum actually drawn out by the assessee during that particular accounting year, What the Income-tax Officer, therefore, did was that he assessed ₹ 1,800 as salary and a further sum of ₹ 2,385 as commission. With respect to the next accounting year, that is the year ending on the 13th of April, 1949, relative to the assessment year 1949-50, the Income-tax Officer proceeded in the same way. He assessed ₹ 1,800 as the assessee's salary and a further sum of ₹ 1,650 as withdrawn against commission already adjusted. It will again be noticed that the whole of the amount actually withdrawn was charged and brought under assessment as commission, whereas the salary was brought in separately, obviously on the accrual basis. From what I have stated, it will be clear that in making the assessments, the Income-tax Officer paid no regard to either section 7 of the Act or to section 34. He treated the amounts of commission as income from other sources, chargeable under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his employer's books and that they had been made available only when he had actually received the amounts from the company. It is again not clear what the Tribunal meant by saying that the amounts of commission had not been made available to the assessee. No one could explain whether the meaning was that the credit entries were bogus entries or whether it was that although certain amounts were credited to the assessee, he would actually not be able to get the amounts if he wanted to withdraw them, his employer being unable to pay. After the Tribunal had decided against the assessee in respect of all the assessment years, he asked for a reference to this Court of three questions of law. The Tribunal thought that a question of law did arise and they framed their own question in the following terms : Whether on the facts and in the circumstances above set out, the assessee's commission income from G. D. Banerjee Co. Ltd., was properly assessed as his income in the years in which he drew it, instead of in the years in which it became due to him? Before dealing with the question, I should like to point out that it does not appear to me to be wholly accurate in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated by the section being assessable either when it accrued due or when it was actually received. At one stage of his argument Mr. Meyer contended that to assess an assessee in one or the other of the two modes lay in the option of the Income-tax Officer, but he subsequently withdrew that contention and argued instead that the option given by the section was an option to the assessee. It was also contended that even assuming that the basis of liability was receipt, the commission had also been received when it had been credited in the books of the company. For what purpose this last contention was advanced is not clear, because Mr. Meyer's concern was to defend the assessment of the various amounts in the years in which they had been physically received. While Mr. Mitra insisted that the only section applicable was section 7 of the Act, Mr. Meyer made no attempt to support the assessment as made under section 12. Both sides expressed some surprise, which we share, that section 12 would have been thought of at all and that section 34 should have been forgotten. If the Income-tax Officer had only proceeded under section 34 when it appeared from the returns submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst block of the words which I have described as crucial, they are which are due to him from, whether paid or not. It appears to me that those words cover all sums which are due, irrespective of whether they are paid or not paid and, therefore, of amounts due, the portion due and paid as well as the portion due and not paid, are both covered. When amounts are due from the employer to the employees, they may be due and may be paid off. They may also be due and remain wholly unpaid. Lastly, they may be due and may be paid in part while apart remains unpaid. All these various contingencies are, to my mind, amply covered by the words, which are due to him from, whether paid or not. What then was intended to be added or is actually added by the next block of words namely, or are paid by or on behalf of ? If it be said that those words were used in order to cover sums due and paid, that purpose has already been served by the first block of words, as I have just explained. If the amounts contemplated by the second block of words are amounts due from the employer, then in order to bring in such amounts which are actually paid, the second block of words was not at all necessary, sums d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he kind referred to in the last part of the first paragraph. The last part says, 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. Advances of income by way of loan or otherwise are not payment of sums which are due. When such advances are made, what is paid is money not due. It appears to me that the words are paid by or on behalf of were added for the purpose mainly, if not wholly, for covering advances of salary or other payments by way of loan or otherwise before they became due. Whether any other kinds of payment which could be said to be covered by the words are also conceivable, I need not pause to enquire. In a sense, the whole of the first paragraph of section 7 deals with amounts which are due. The first block of the words which I have called crucial contemplates amounts which are due in fact. The second block contemplates amounts which are not due in fact, but which are made due by the last words of the paragraph by means of a fiction, because it is said that they also shall be deemed to be salary due on the day when the adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer and its object is to declare the taxability of the amounts in the circumstances specified. The object is not to confer any option on anybody. Reverting now to the question referred in the present case, so far as the assessment years 1943-44 and 1944-45 are concerned, the amounts received in the relevant accounting years had become due earlier. They were therefore not liable to be included in the assessments for those assessment years. As regards the assessment year 1948-49, the question does not seem to me to arise, because the whole of the commission amount included in the income of the relevant accounting year was earned in that very year and was not either wholly or in part accumulated or arrear commission of any previous year. As respects the last assessment year, the amount of ₹ 1,650 is referable only in part to commission which had been earned in a previous year, but what that part is no one has determined. In the result, the question referred should, in my opinion, be answered in the following way : As respects assessment years 1943-44 and 1944-45- No. As respects the assessment year 1948-49, the question does not arise. As respects the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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