TMI Blog1965 (3) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. We accordingly accept the appeals, set aside the order of the High Court and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, which is part of the case. Sub-clause (c) of clause 2 of the agreement prescribed that "such commission shall become due and payable to the managing agents every year immediately on the passing of the audited accounts of the company by the shareholders at a general meeting at each and every year during the continuance of these presents." It appears that the managed company claimed this amount as expenses for its assessment year 1952-53, and the assessing authority allowed it as an expense for that year. The assessee-company, however, claimed before the Income-tax Officer assessing its own income that the commission did not accrue to them during the accounting year 1951-52 as the requisite resolution was not passed during the accounting p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to it as per the managing agency agreement. Having obtained concurrence of the Inspecting Assistant Commissioner, he held that section 23A of the Income-tax Act applied and passed an order that the remaining profits of Rs. 25,037 be deemed to have been declared as dividend among shareholders. He was not impressed with the plea that the profits were small. He arrived at the figure of Rs. 25,037 thus. He took the assessable income at Rs. 58,503 and the income-tax and super-tax payable at Rs. 23,950. Deducting Rs. 9,516 as the dividend declared by the company, he arrived at the balance of Rs. 25,037. In respect of assessment year 1953-54, he held that Rs. 60,583 should be deemed to have been declared as dividend among the shareholders. Fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion on the facts of the case that the company should have declared 100 per cent. profits left in its hands after paying the taxes, i.e., Rs. 33,047, instead of Rs. 18,300. Therefore, he directed that a further sum of Rs. 14,747 be deemed to have been distributed as dividend as at the date of the general meeting, i.e., June 30, 1950. The Income-tax Officer filed two appeals before the Income-tax Tribunal. The Appellate Tribunal held that in spite of the provision in the agency agreement, it was not correct to say that the managing agency had not earned the commission at the close of the accounting year. It observed that " an ascertained debt had been created in their favour. It was an asset. The payment was only deferred af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that arises is whether it was open to the Income-tax Officer to disregard the assessment order and ascertain the true commercial profits. The learned counsel for the respondent urges that the Income-tax Officer cannot disregard the items that went to make up the receipts, but he can reconsider the items on the expenditure side; for example, he can consider the reasonableness of a particular expenditure. In other words he does not contend that the assessment order is final for all purposes. We are unable to agree with this contention. Proceedings under section 23A are separate proceedings, and recently Subba Rao J., speaking for the court, in analysing section 23A, observed thus in Commissioner of Income-tax v. Gangadhar Banerjee and Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been included in the assessable income and there was nothing "notional" about managing agency commission. But the question which we have to consider is whether managing agency commission not due in the accounting period becomes "accounting profits" because an Income-tax Officer erroneously treats it in the assessment order to be due in that period. It seems to us that the answer is plainly in the negative. Mr. Rajagopala Sastri further urges that if we hold that the assessment order was not conclusive on the question, on the facts of this case there was an implied agreement superseding the managing agency agreement by which the managing agency commission became due in the accounting periods. He points out that it is stated in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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