TMI Blog1960 (2) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... a percentage on total sales or three pies per pound and this was exercisable at the end of the year. There was also a liability to pay back a portion of the commission in certain contingencies which also could be determined only when the accounts were made up for the year. It is thus clear that there was no accrual of any commission till the end of the year. On this construction of the contract it cannot be held that the commission had accrued as and when the sales took place and that as a result of their agreeing to the modification of the agreement the managing agents had voluntarily relinquished a portion of their commission. On the other hand under the original agreement the managing agents were entitled to receive commission only at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 (ten) per cent. on the proceeds of sale of all other materials sold by the company and 10 (ten) per cent. on the bills of any ginning and pressing factories and on any other work done by the company. (b) If in any year the net profits of the company shall not be sufficient to enable the directors, if they think fit, to recommend a dividend of eight per cent. per annum on the capital paid up on the ordinary shares for the time being, the same firm shall be bound to give up from the total amount of commission payable under clause 2(a) hereof such portion thereof as may be necessary to make up the deficit. PROVIDED THAT in no event the amount so given up by the said firm shall exceed one-third of such total amount of commission. And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These sums were added to the income of the managing agents for the purpose of income-tax. An appeal was then taken to the Income-tax Appellate Tribunal and it was held by the Tribunal that the agreement between the managing agents and the managed company to receive remuneration at 3 per cent. on the total sales was a valid one and took effect as from January 1, 1950. The second question, whether the commission accrued on the proceeds of every single sale or it accrued only when the assessee firm exercised its option to charge its commission on the total sale proceeds or on the weight of the yarn sold and whether the managing agents were to get the amount of commission after the whole profit was determined at the end of the year, was decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from commission which had already accrued was liable to income-tax ; and reference was made to the cases reported as Commissioner of Income-tax v. Thiagaraja Chetty Co., Sassoon Co. Ltd. v. Commissioner of Income-tax and to an English case Commissioners of Inland Revenue v. Gardner, Mountain D'Ambrumenil Ltd. But these cases have no application to the facts of the present case. In Commissioner of Income-tax v. Thiagaraja Chetty Co., the assessee firm was, under the terms of the managing agency agreement, entitled to a certain percentage of profits and in the books of the company a certain sum was shown as commission due to the assessee firm and that sum was also adopted as an item of business expenditure and credited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This passage does not help the appellant's case. The question there decided was that the accrual of the commission was not dependent upon the computation of the profits although the question whether it would make any difference where the commission was so payable or was payable after the expiry of a definite period for the making of the account was left undecided. In the case before us the agreement is of a different nature and the above observations are not applicable to the facts of the present case. The next case is Sassoon Co. Ltd. v. Commissioner of Income-tax. But it is difficult to see how it helps the case of the appellant. If anything it goes against his contention. In that case the assessee company was the managing ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the sale, whichever the managing agents chose ; thus there was an option to be exercised at the end of the year, (3) they were also to be paid at 10 per cent. on the proceeds of sales of all other materials ; and (4) the mills were to pay to the managing agents each year after December 31, or such other date which the directors of the company may choose for the closing of the accounts. There was a further clause that if the net profits of the managed company, that is, the mills, were not sufficient to enable the directors to recommend a dividend of 8 per cent. per annum on the paid up capital, then the managing agents were bound to forgo a portion of their commission up to one-third. All these provisions as to payment have to be read t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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