TMI Blog1962 (3) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... e larger. This was not a gift by the assessee-firm to the managed companies. The reduction was a part of the agreement entered into by the assessee-firm to secure a long-term managing agency arrangement for the two companies which it had floated. Thus the High Court was right in coming to the conclusion that on the facts of this case the larger income neither accrued nor was received by the assessee-firm. Appeal dismissed. - - - - - Dated:- 27-3-1962 - Judge(s) : M. HIDAYATULLAH., J. C. SHAH JUDGMENT The judgment of the court was delivered by HIDAYATULLAH J.----This is an appeal on a certificate of fitness under section 66A(2) of the Indian Income-tax Act by the High Court of Bombay, against its judgment dated Octobe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its desire to resign from the managing agency and to have the private limited companies appointed on the same terms. Two shareholders of the Malabar Steamship Co. Ltd. objected to the rate of commission, and wrote a letter on November 27, 1947, in protest. They suggested that the commission should be either 10 per cent. of the profits of the managed company or 2 1/2 per cent. of the freight received. This letter was considered by the board of directors of the Malabar Steamship Co. Ltd., and, they invited the assessee-firm to make an offer to reduce the managing agency commission to 2 1/2 per cent. of freight for the current year as also for the future years. As a result, the assessee-firm made an offer as follows : " That whilst we will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rger commission had already accrued during the previous year ending March 31, 1948, and was thus assessable. The amount given up was also claimed by the assessee-firm as an expenditure under section 10(2)(xv) of the Indian Income-tax Act, but was disallowed. On appeal to the Appellate Tribunal, the Accountant Member was of the opinion that the appeal should be rejected. The Judicial Member, however, took the opposite view. The case was then laid before the President, who agreed with the Judicial Member. According to the President, even though the actual reduction took place after the year of account was over, there was, in fact, an agreement to reduce the commission even during the currency of the account year, and the larger income neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ened in the subsequent year did not alter the position in the relevant previous year. The Bombay High Court relied upon an earlier decision of the same court reported as Commissioner of Income-tax v. Chamanlal Mangaldas Co., and held that the events during the account year were themselves sufficient to show that the income neither accrued to the assessee-firm nor was received by it so as to become assessable. The decision of the Bombay High Court was approved by this court in Commissioner of Income-tax v. Chamanlal Mangaldas Co. In Commissioner of Income-tax v. Chamanlal Mangaldas Co. the assessee was also the managing agent of a company, and under the agreement was entitled to receive commission at a certain rate. By another ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. This is exactly what has happened in this case, as it happened in the Bombay case, which was approved by this court. Here too, the agreements within the previous year replaced the earlier agreements, and altered the rate in such a way as to make the income different from what had been entered in the books of account. A mere book-keeping entry cannot be income, unless income has actually resulted, and in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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