9911796707
TMI Blog1960 (12) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 agreement, by which the appellants were appointed managing agents, the following remuneration was, provided : 1. Office allowance at Rs. 1,500 per mensem ; 2. Commission at 1% on all purchases of cotton and stores and 2 1/2% on all capital expenditure incurred from time to time ; and 3. Commission at 10% on the net profits of the company due and payable yearly immediately after the accounts of the company were cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Act. The tax officer also determined the proportionate commission payable under items 3 and 4, for the period ending March 31, 1946, and, as a result of the apportionment, the liability of the appellants, original and revised, for income-tax and excess profits tax for the assessment year 1945-46 and chargeable accounting period April 1, 1944, to March 31, 1945, stood as follows : Original assessment of income-tax Rs. 1,04,654 Exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appeals have been preferred with certificate granted under section 66A(2) of the Income-tax Act read with section 21 of the Excess Profits Tax Act. Two questions were canvassed in these appeals : " 1. Whether it was open to the taxing officer to reopen the assessment for 1945-46 ? and 2. Whether the commission received by the appellants was liable to be apportioned under rule 9 of Schedule I of the Excess Profits Tax Act ?" The appellants maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 accordance with Schedule I. That schedule sets out rules for computation of profits for the purpose of the Excess Profits Tax Act ; and by rule 9 it is provided in so far as it is material that : "Where the performance of a contract extends beyond the accounting period, there shall (unless the Excess Profits Tax Officer, owing to any special circumstances, otherwise directs) be attributed to the accounting period such proportion of the entire profits or loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for the whole year, but on that account the contract is not one in which performance does not extend throughout the year of account. Normally in a managing agency contract, the managing agent may not suffer loss, but that does not rule out the application of rule 9 to managing agency contracts. The terms in which rule 9 is enacted are general ; the rule is applicable to all contracts which are intended to be operative for a fixed period. If, for the performan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 income which E. D. Sassoon & Co. Ltd. had earned, they were not liable to be taxed under the Income-tax Act. But that was a case dealing with liability of the assessees who did not receive any income and to whom no income had accrued to pay income-tax on the amounts of remuneration paid to their transferees. The court was not called upon to apply to income received by the assessee the principle of apportionment under rule 9 of Schedule I of the Excess Profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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