Prior to the appellants appointment Sharma Co., a partnership firm, was functioning as the sole selling agent of the Kanpur Cotton Mills.
Clause 13 That the authority given above to the companyporation to retain and adjust a part of the trade discount towards the outstanding against M s Sharma Co. will number be revocable and will be binding on the sole selling agents, their successor, or assigns only so long as they act as the companyporations sole selling agents and will be deemed to be a companydition on which the sole selling agency has been granted to the agents.
1080 On the same day, i.e. March 23, 1955 Kailash Nath Agarwal addressed a letter to the Managing Director of BIC informing him ,of the agreement with Sharma Co. and requesting for the grant of sole selling agency to the appellant.
50,0001 per annum so that the amount payable to the sole selling agents shall be the amount payable at the rate of II minus the aforesaid amount retained by the companyporation as payable to M s Sharma Co. Clauses 12 and 13 of the indenture were as under Clause 12 That in the event of the dissolution of M s Sharma Co. before the companyplete repayment of their liability the sole selling agents agree that the companyporation may companytinue to retain an amount equal to one seventh of 1081 the trade discount of 1 3/4 or 50,000/ whichever is greater and adjust it towards such dues of M s Sharma Co. as may them be standing.
On July 31, 1956 on indenture was executed by BIC and the appellant relating to the apointment of the appellant as the sole selling agent of the Kanpur Cotton Mills for the sale of yarn, cloth and companyton manufactures with effect from April 1, 1955.
During the year under reference, the companymission as per terms of the indenture dated July 31, 1956 payable to the appellant amounted to Rs.
50,000/ per annum till your dues against them are cleared with interest.
Case No.
The letter companycluded as follows I hereby authorise you in case you are pleased to grant your sole selling agency to my said firm to retain one seventh of our companymission for adjustment in the account of M s. Sharma Co. with minimum of Rs.
50,0001 whichever is greater out of the companymission earned by the new sole selling agents and credit the same to your account with us till our dues against you standing today at Rs.
43,333/ retained by the British India Corporation and adjusted by it to the credit of Sharma Co. was the assessable income of the appellant companypany ?
Whether on the facts and circumstances of the case, the sum of Rs.
The Managing Director of BIC was requested to appoint Kailash Nath Agarwal or any firm or companypany forced by him for this purpose as the sole selling agent in place of Sharma Co. Reference was also made in that letter to an agreement between Sharma Co. and Kailash Nath Agarwal in the following words As you will numberice from the agreement with Sri Kailash Nath Agarwal we are entitled to receive one seventh of the companymission due to the new selling agency or to a sum of Rs.
The amount due by Sharma Co. to the Kanpur Cotton Mills as on March 21, 1955 was Rs.
The agents will have numberclaim whatsoever to any such amounts retained out of their numbermal trade discount and adjusted in the account of M s Sharma Co. as if the amount so retained was number payable to them.
In this indenture the appellant ratified the agreement entered into by Kailash Nath Agarwal with Sharma Co. on March 23, 1955 and authorised BIC to give effect to the said agreement generally and in particular to retain an amount equal to one seventh of the trade discount of 1 3/4 due to the sole selling agents with a minimum of Rs.
Appeal by certificate under Article 133 of the Constitution of India from the judgment and order dated February 16, 1966 of the Allahabad High Court in Misc.
50,000/ per annum whichever is greater, till your dues with interest are fully liquidated.
CIVIL APPELLATE JURISDICTION C.A. No.
We do hereby authorise you to retain this amount thus becoming due to us out of the companymission payable to the agency and adjust the same to our firms account with the Corporation.
8,39,350/15/6 are companypletely liquidated with interest thereon at 6.
The matter relates to the assessment year 1956 57.
43,333 were retained by BIC under the companytract for adjustment against the outstanding dues of Sharma Co. in accordance with the terms of the indenture.
434 of 1962.
The Mananging Director of BIC later on that day, i.e. March 23, 1955 addressed a letter to Sharma Co. accepting its resignation from the sole selling agency of the Kanpur Cotton Mills and about the appointment of Kailash Nath Agarwal or his numberinee as the sole selling agent in succession to Sharma Co. In regard to the liquidation of dues from Sharma Co. the Managing Director of BIC wrote As agreed between Shri Kailash Nath Agarwal and yourselves we shall deduct one seventh of the companymission or Rs.
The Judgment of the Court was delivered by Khanna, J. This appeal on certificate granted by the Allah, bad High Court is directed against the judgment of that companyrt 1079 whereby it answered the following two questions referred to it under section 66 1 of the Indian Income Tax Act, 1922 hereinafter referred to as the Act against the appellant and in favour of revenue Whether on the facts and on a true and proper interpretation of the agreement dated 31 7 1956, between the British India Corporation and the appellant companypany, the letters of Sri Kailash Nath Agarwal, the letters of Managing Directors, the sum of Rs.
342 of 1969.
43,333/ represented an expenditure under section 10 ?
P. Maheshwari, for the appellant.
On March 23, 1955 a letter was addressed on behalf of Sharma Co. to the Managing Director of BIC stating that an agreement had been entered into with Kailash Nath Agarwal whereby Sharma Co. had agreed to give up the sole selling agency of the Kanpur Cotton Mills.
8,39,350/15/6 inclusive of interest.
As per agreement dated July 31, 1956 the appellant was appointed with effect from April 1, 1955 the sole selling agent of the Kanpur Cotton Mills for the sale of yarn and cloth manufactured by the said mills.
The appellant is a private limited companypany and Kailash Nath Agarwal is one of its directors.
A. Ramachandran, R. N. Sachthey and S. P. Nayar, for the respondent.
The Kanpur Cotton Mills is owned by the British India Corporation hereinafter referred to as BIC.
