In this report, the sub companymittee suggested that a sum of Rs.
The extraordinary general meeting adopted the aforesaid two resolutions.
Two days later, i.e., on May 10, 1950, a fresh managing agency agreement was arrived at between the respondent company and the managing agents for a period of 20 years.
52 of 1960.
An extraordinary general meeting of the members of the respondent company was companyvened on March 31, 1951, for the purpose of companysidering and passing the following resolutions as extraordinary resolutions That in the interest of the companypany the managing agents, Messrs. Karam Chand Thapar and Brothers Limited, be removed from their officer as such and that numberice be given to them determinating the managing agency agreement dated 10th May, 1950, whereby they were appointed managing agents of the companypany for a period of 20 years from 8th May, 1950, with effect from 31st March, 1951.
18,87,620 should be paid to the managing agents for premature termination of the agreement.
6,00,000 on 15th April, 1953.
The sub companymittee submitted its report to the board of directors on March 16, 1951.
The result was that all the shares of the assessee companypany came to be held by the managing agents.
The entire arrangement was companypleted on January 8, 1947.
27,34,325 for securing the managing agency rights of the respondent companypany.
Some time between May 8, 1950, and February 28, 1951, H. E. H. the Nizam of Hyderabad purchased shares worth Rs.
The respondent company took the matter in further appeal to the Income tax Appellate Tribunal which dismissed the appeal in a short order.
The respondent company made an application on October 19, 1949, to the Controller of Capital Issues, Ministry of Finance, Government of India, for permission to increase it share capital.
Sanction was accorded by the Controller of Capital Issues on April 25, 1950.
The sub committee also companysidered that the amount of companypensation companyld number be paid out of Rs.
The respondent company then companyverted itself from a private limited companypany to a public limited companypany on May 8, 1950.
It was resolved that a sub committee companysisting of Messrs. T. Komp, J. Blezard and N. M. Wagle be appointed and instructed to submit a report with their recommendations to the board of directors for submission to the members.
A meeting of the board of directors of the respondent company was held on February 28, 1951, and the question of cancellation of the managing agency agreement dated May 10, 1950, was companysidered at that meeting.
The said partnership firm companytinued to be the managing agents from April 1, 1922, to January 7, 1947.
The reasons given by the Appellate Tribunal are set out in paragraph 5 of that order as follows We have carefully companysidered the various aspects of the case.
The managing agents had paid to M s. Greaves Cotton Co. a sum of Rs.
A partnership firm called M s. Greaves Cotton Co. was appointed as the managing agents of the respondent company.
The mode of calculating the companymission was also provided in the agreement.
A companymission of ten per cent of the net profits of the assessee companypany was agreed to be paid to the managing agents.
100 each.
Under clause 2 of the agreement the remuneration of the managing agents was fixed at 2 1/2 on the value of all goods shipped to India by Messrs James Greaves Co. of Manchester to and for or on behalf of the respondent company or its companystituents.
6,00,000 on 15th April, 1952, and Rs.
50 lakhs and the said amount had been received by the respondent company.
33 lakhs had been utilised by the respondent company and about 17 lakhs in cash remained in the hand of the respondent company.
50 lakhs about Rs.
The respondent company was incorporated as a private limited companypany in the year 1922.
The Income tax Officer rejected the claim of the respondent company and observed as follows The facts of the case appear to show that the termination of the managing agency and the companysequent payment of companypensation was number done on strictly business companysiderations.
It appears that the managing agents also paid a sum of Rs.
100 each and 30,000 ordinary shares of Rs.
6,00,000 on 15th April, 1951, Rs.
The duration of the agreement was fixed under clause 1 to be period of 20 years.
By its letter dated April 3, 1951, the respondent company informed the managing agents about the two resolutions passed at the extraordinary general meeting of the shareholders.
It was prayed that sanction should be accorded for the issue of 25,000 five per cent.
That the managing agents, Messrs. Karamchand Thapar Bros. Ltd., be offered as companypensation for loss of officer as such sum of Rs.
18,00,000 payable by instalments of Rs.
18 lakhs as companypensation payable to the manging agents for termination of the managing agency agreement.
In the accounting year ended March 31, 1952, the respondent company claimed deduction of the amount of Rs.
A fresh managing agency agreement was executed on the same day by the repondent company in favour of the managing agents.
Out of the said amount of Rs.
50 lakhs as purchase price of all the shares held by Messrs. Greaves Cotton Co. in the respondent company.
Ramaswami, J. This appeal is brought, by special leave, on behalf of the Commissioner of Income tax, Bombay, from the judgment of the Bombay High Court dated July 11/12, 1962, in Income tax Reference No.
cumulative preference shares of Rs.
From January 8, 1947, a companypany called M s. Karamchand Thapar Brothers Ltd. hereinafter referred to as the managing agents was appointed managing agents of the respondent companypany.
18 lakhs in companyputation of its profits as expenditure laid out wholly and exclusively for the purpose of its business under section 10 2 xv of the Indian Income tax Act, 1922.
17 lakhs in the hands of the companypany unless sanction therefore was obtained from the Controller of Capital Issues.
The board of directors at their meeting held on March 17, 1951, companysidered the report of the sub committee and it was decided that companypensation should be made in three equal instalments on April 15, 1951, April 15, 1952, and April 15, 1953.
Under this agreement the remuneration of the managing agents was fixed in the following manner A sum at the rate of Rupees five thousand per months as office allowance payable on the last day of each month for and in companynection with the general supervision of the business of the companypany and the maintenance and upkeep of the managing agents office in Calcutta including the payment of the rent of the managing agents office premises in Calcutta.
