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TMI Blog1965 (3) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly included the commission of Rs. 41,842 and Rs. 1,16,690 in the applicant's profits of the accounting periods ended 31st March, 1952, and 31st March, 1953, respectively ? and (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the orders under section 23A ? " The appellants, J. P. Shrivastava and Sons (Bhopal) Private Limited, hereinafter called "the assessee-company", was at the relevant time the managing agents of New Bhopal Textile Ltd., hereinafter called "the managed company." Both the assessee-company and the managed company had the financial year as their accounting period. For the accounting period ending March 31, 1952, the assessee-company was entitled to the managing agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amount was debited in its accounts and allowed as expenses by the Income-tax Officer for the previous year ending March 31, 1953. The assessee-company appears to have accepted this position and not filed any appeal against the inclusion of the said sum in its assessment. The assessee-company declared dividends of Rs. 9,516 and Rs. 18,300 in respect of the accounting period ending March 31, 1952, and March 31, 1953, respectively. The Income-tax Officer, by order dated March 11, 1953, applied section 23A to the year of assessment 1952-53. He came to the conclusion that as the assessee-company and the managed company both had the financial year as the accounting year and that as the assessee-company maintained its accounts on the mercant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company in its accounts for the year ending March 31, 1952, and March 31, 1953, the assessee-company could not account for these commissions till the accounts of the managed company had been passed. He was of the opinion that the word "profits" in the expression "smallness of profits made" meant accounting profits. He found that for the assessment year 1952-53, the assessee had declared as dividend more than the distributable surplus left with it after payment of the taxes, but in respect of the assessment year 1953-54, whereas the distributable surplus came to Rs. 33,047, i.e., Rs. 58,426, income returned by the assessee less taxes thereon Rs. 25,379, it had declared a dividend of Rs. 18,300 only, the distribution being more than 60 per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not be a businessman's approach to the question." The High Court answered both the questions in the affirmative. It held that the assessee-company not having appealed against the assessment orders including the sums of its assessable income for the respective years could not contend in the proceedings under section 23A that for calculating the commercial profits these sums should be excluded, and this notwithstanding that under the managing agency agreement the commission did not accrue till the passing of the audited accounts by the shareholders at a general meeting. It observed that "the time of the accrual and payment of the managing agency commission has no bearing at all on the question whether the managing agency commission income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 23 he is not concerned with this. There he is concerned with assessable income or profits. Therefore, it is difficult to appreciate why a finding in the assessment order that a particular income is assessable income or profits necessarily means that that assessable income must form part of the accounting profits. It seems to us that the Appellate Assistant Commissioner was right in going into the question and holding that under the managing agency agreement the assessee-company did not have any right to receive the commission till the general meeting of the managed company was held and, therefore, it could not form part of its accounting profits. Mr. Rajagopala Sastri further urges that in proceedings under section 23A the I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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