TMI Blog1960 (12) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... s delivered by SHAH, J.--These appeals relate to excess profits tax liability of the appellants in respect of two chargeable accounting periods, April 1, 1944, to March 31, 1945, and April 1, 1945 ; to March 31, 1946. The appellants were, under an agreement dated July 11, 1945, appointed managing agents for 20 years of the Coimbatore Spinning and Weaving Co. Ltd.--hereinafter referred to as the company. Prior to October 1, 1944, the appellants were the managing agents of the Coimbatore Mills Agency Ltd.--hereinafter referred to as the agency company, who were the managing agents of the company. The year of account of the appellants ended on March 31, of the company on June 30 and of the agency company on September 30. Under the agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30-6-1945 Rs. 16,777 4. Commission at 2 1/2% on capital expenditure from 1-10-1944 to 30-6-1945 Rs. 1,690 The tax officer in charge of the assessment directed that the commission on purchases and capital expenditure be taken into account for the year April 1, 1945, to March 31, 1946, and that the receipts be computed accordingly. The amount of Rs. 1,127 attributable out of item 4 was accordingly taken into the account of the previous year after reopening the assessment under section 34 of the Income-tax Act and the commission on the profits of the company was apportioned between the period October 1, 1944, to March 31, 1945, and April 1, 1945, to June 30, 1945, by the application of rule 9 of Schedule I of the Excess Profits Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of rule 9, Schedule I, were properly applied ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Officer/Excess Profits Tax Officer was correct in including the proportionate commission income of Rs. 1,127 for income-tax assessment 1945-46 and Rs. 1,43,163 plus Rs. 1,127 for excess profits tax assessments for the chargeable accounting period ending 31st March, 1945 ? and 4. Whether, on the facts and in the circumstances of the case, the proportionate commission of Rs. 37,129 and Rs. 2,299 were rightly assessed for the assessment year 1946-47 ? The High Court answered all the questions against the appellants and in favour of the Department. Against the order passed by the High Court, these ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 13 and may proceed to assess or reassess the profits. The provision is substantially similar to section 34(1) of the Income-tax Act before it was amended in the year 1948. It is manifest that, by the assessment of income made on the assumption that the chargeable accounting period and the account ing period of the company tallied, there resulted under-assessment in the computation of tax liability for excess profits tax and it was open to the tax officer to take action under section 15 of the Excess Profits Tax Act. Determination of the second question depends upon rule 9 Schedule I of the Excess Profits Tax Act. By section 2(19) of the Excess Profits Tax Act, the expression " profits " means profits as determined in accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is true that remuneration was paid to the appellants after the expiry of the year of account of the company ; but the contract was one the performance of which extended throughout the year of account of the company. The appellants were the managing agents of the company and they had to perform their duties as managing agents for the whole year. It is not disputed that the contract of agency for 20 years is to be regarded for assessment of excess profits tax as an annual contract. That the performance of the contract unmistakably cut across the accounting period is also manifest. The remuneration for performance of the contract is not computed at a daily rate, but is computed on a percentage of the commission on the profits of the company fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation of the managing agency agreements in each case, the contract of service between the companies and the managing agents was entire and indivisible and the remuneration or commission became due by the companies to the managing agents only on completion of definite periods of service and at stated intervals ; that complete performance was a condition precedent to the recovery of wages or salary in respect thereof and the remuneration payable constituted a debt only at the end of each period of service completely performed, no remuneration or commission being payable to the managing agents for broken periods; that no income was earned by or accrued to M/s. E. D. Sassoon Co. Ltd. and as the transfer of the agencies did not include any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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