TMI Blog1975 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . P. Nataraja Sastri . . . . . . .Rs. 500 . . . . . . . ." 2. We are omitting the names of the other directors mentioned in the resolution with whom we are not concerned here. The company in which the assessee is a director consists of nine shareholders, seven of whom, as already seen, are directors. The total remuneration payable to all the directors monthly would have involved an outlay of Rs. 68,400 per year, at the rate of Rs. 5,700 per mensem. The company appears to have suffered losses and, according to the balance sheet as on 31st March, 1963, the profit and loss account stood at a deficit of Rs. 25,490 and there was no reserve of any kind. On 23rd January, 1964, that is, after the close of the year, there was another resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be mentioned here that there were no entries crediting the assessee with the monthly remuneration of Rs. 500 in accordance with the resolution of 29th September 1962, mentioned already. 4. The assessee appealed to the AAC, contesting the assessment of the said sum of Rs. 5,000. The AAC held that the retrospective character of the resolution accepting the waiver was evident from the company's own accounts and that there was no reason to doubt the bona fides of the claim of the assessee. He, therefore, deleted the sum of Rs. 5,000 from the assessment. The Revenue filed an appeal before the Tribunal which, following the decision of the Supreme Court in CIT vs. Shoorji Vallabhdas Co. (1962) 46 ITR 144 (SC), held that the AAC's order direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle that the assessee could be taxed only on the real income earned by him. 6. The decision in Kothandaraman vs. CIT has considered all the earlier decision on the point including those relating to managing agencies. In that case, the assessee was entitled to a monthly remuneration of Rs. 1,250 plus a commission at the rate of five per cent. on the net profit of the company as its managing director. The commission was due and payable yearly, while he was entitled to draw monthly remuneration every month. For the accounting year ending with 31st December, 1959, the company credited the assessee with a remuneration of Rs. 1,250 per month, but on 31st December, 1959, the entries were reversed and the assessee was debited with a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties to meet and to agree to modify the agreement either prospectively or retrospectively. If there is a retrospective modification of the agreement, then to the extent that there has been a reduction of denial of the managing agent's remuneration the income could not be said to have accrued. This was the principle that was decided by the Supreme Court in CIT vs. Shoorji Vallabhdas Co. This decision was subsequently considered and explained by the Supreme Court itself in Morvi Industries Ltd. vs. CIT [1971] 82 ITR 835 (SC). After referring to the decision in CIT vs. Shoorji Vallabhdas Co., the Supreme Court pointed out that in the case before them, the amounts of income were given up unilaterally after they had accrued to the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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