TMI Blog1963 (2) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... at would have been due to it under the managing agency agreement for the three years in question. This contention was repelled by the Income-tax Officer, who held that the managing agency commission had accrued to the company and that the alleged waiver amounted only to a gift. Before the Appellate Assistant Commissioner it was urged that the assessee company waived the managing agency commission due to it in order to strengthen the finances of the managed company and that since there was no likelihood of the commission ever being received by it after such waiver, it was not liable to be taxed. The appellate authority, while accepting the position that the commission amounts were not received by the assessee company, found that there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anaged companys accounts were certified by the companys auditors, and according to him, the waiver had taken place at that time, so that no part of the commission accrued to the assessee. The managing agency agreement had been produced before us. Clause 4 of this agreement states that in addition to a monthly office allowance payable to the assessee : The said managing agents shall, during their tenure of office, be paid in every year in which the company declares a dividend of not less than four per cent.... a commission equal to ten per cent. of the net profits of the company for that year. How the net profits should be computed is set out in that clause and the last sentence of that clause reads : The said commission shall bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept for the statement that was made before the Appellate Assistant Commissioner, and here, that the waiver was for the reason that the finances of the managed company had to be built up, is there any material to support that statement. The audited accounts of the managed company, the Investment Trust of India, for the three years in question have been placed before us. At the end of the revenue account of each year, the following statement finds place : The managing agents have waived the commission due to them on the profits. These accounts bear the dates 20th October, 1953, 17th November, 1954, and 3rd November, 1955. Taking these statements at their face value and assuming that they represented the exercise of the right of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent. and to give up the balance of the commission. The department however claimed to be entitled to assess the entire amount on the ground that this amount had already accrued to it and that the agreement after the close of the previous year to give up a portion of that income could not take it out of chargeable income. Their Lordships of the Supreme Court held on the above material that the subsequent agreement really effected an alteration in the terms of the original agreement and if that were so, the mere fact that a larger amount had been credited in the books of account was not sufficient to lead to the conclusion that such larger amount had in fact accrued to the assessee. Though the actual agreement altering the rate of commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the year, the terms of the agreement were varied, the income that accrues could be only on the basis of the altered agreement. This case was referred to in Commissioner of Income-tax v. Chamanlal Mangaldas and Co. These cases do not support the assessees claim in the reference before us. As we have pointed out, there is no evidence of any agreement of any description which operated to alter the rate of commission or give up the commission due to the assessee. No such agreement or transaction which could be regarded as an agreement was entered into during the accounting year. If after the accrual of the income, according to the terms of the managing agency agreement, the managing agents purported to give up any part of that income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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