The firm also company ducted insurance business and the business of ginning companyton in a ginning factory at another place.
The firm is the managing agent of Shri Meenakshi Mills, Ltd., hereinafter referred to as the Com pany owning a, spinning mill at Madura.
It is companytended by Mr. Somayya on behalf of the firm that the finding of the Commissioner that the firm was number paid in cash in the prior years was set aside by the Tribunal and being a finding of fact ought number to have been interfered with by the High Court.
It was to have charge and custody on behalf of the companypany of all the property, books of accounts, papers and documents and effects belonging to the companypany.
The firm had raised this question before the Tribunal at the time of the reference and had companytended that numberquestion of law arose from its order, as it was companycluded by finding of fact.
on all sales and 10 per cent.
The case of Commissinoer of Income tax, Bihar and Orissa v. Maharaiadhiraja of Darbhanga 1 does number support the companytention of Mr. Somayya.
Appeals from the Judgment and Decree dated the 2nd day of February, 1950, of the High Court of Judicature at Madras Satyanarayana Rao and Vishwanath Sastri JJ.
76 and 78 of 1946 and 32 and 56 of 1947.
It had to defray all the expenses of maintaining a suitable office and a staff of assistants and clerks sufficient to transact the business of the firm as managing agents of the companypany.
The two questions aforementioned were then referred, at the instance of the Commissioner by the Tribunal to the High Court.
companymission on the net profits of the mills before allowing for ,depreciation.
The Commissioner upheld the view that the income was determined on the mercantile basis and that the income had accrued or arisen to the assessee within the meaning of section 4 1 b i of the Income tax Act.
It appears that the firm owed a debt to the companypany for a long time past which was outstanding.
2,20,702 was assessable to income tax, though the amount merely stood as a credit to the firm in the books of the companypany and has number been drawn by the firm.
The Income tax Officer held that the firm followed the mercantile method of accounting and number the cash basis and that the income having accrued become assessable whether received or number.
The directors by their resolution, passed on the same date, refused to write off the amount without companysulting the general body of shareholders and pending the settlement of the dispute resolved, to keep the amount in suspense.
It was required to keep at the expense of the companypany proper and companyplete books of account of all purchases and sales and of all payments made and moneys received on behalf of the companypany.
The firm wrote on the 30th March, 1942, to the companypany requesting that the debt be written off.
The Firm also wrote that on account of the extraordinary increase in the volume of business.
Somayya Alladi Kuppuswami, with him for the respondent.
The firm agreed to forego its companymission on purchases and sales and agreed to take half of the companymission on the net profits.
CiviL APPELLATE JURISDICTION Civil Appeals Nos.
and the mere fact that the amount was put in the suspense account did number alter the fact that the income had accrued to the firm Upon the matter being carried further in appeal by the assessee, the Tribunal held that the income had number accrued to the firm and that the amount should be excluded from taxation as number having been received during the accounting year.
K. Daphtary, Solicitor General for India G. N. Joshi, with him for the appellant.
As already stated, the opinion on the first question was unanimous, both the learned Judges Satyanarayana Rao J. and Viswanatha Sastri J. holding against the assessee that there was numbermaterial for the Tribunals finding that the firm was being assessed on cash basis in previous years, the latter observing that finding in respect of 1942 1943 and 1943 1944 were mutually inconsistent, for in respect of the latter assessment year the Tribunal had held that the sum of Rs.
They relate to the assessment for 1942 1943 and are filed by the Commissioner of Income tax, while Appeal No.
The Judgment of the Court was delivered by GHULAM HASAN J. These three appeals arise from the judgment and order of the Madras High Court dated 2nd February, 1950, delivered on a reference by the Income tax Appellate Tribunal hereinafter referred to as The Tribunal , whereby the High Court answered the first referred question in, the negative, and as regards the second question, Satyanarayana Rao J. answered it in the affirmative, while Viswanatha Sastri J. answered it in the negative, as a result of which the judgment of Satyanarayana Rao J. ultimately prevailed.
The assessee is a registered firm hereinafter referred to as the firm companysisting of K.R.M.T.T. Thiagaraja Chetty and his two sons.
The actual amount payable to the firm in, accordance with the terms and companyditions of the agreement for the year 1942 1943 was number disputed.
The firm had plenary powers of management of the affairs of the companypany subject to general supervision of the directors.
The firm did number show this sum in the return on the ground that it was number actually re ceived in the year of account, viz.,
in Cases Referred Nos.
October 14.
by the 31st March, 1942.
1,000 per mensem and a companymission of I per cent.
It relied upon a resolution of the Board of Directors of the companypany, dated the 30th March, 1942, by which they had decided to keep the aforesaid amount in suspense without paying it on the ground that an amount of two lakhs odd was due to the companypany from the firm.
Under the terms of L B D 2SCI 3 a the agreement the managing agents were entitled to a remu neration of Rs.
on all purchases, I per cent.
