in the next accounting year ending on june 30 1957 relevant to the assessment year 1958 59 the same process was followed with regard to the remuneration payable to the managing agents.
though this sum did number pertain to the previous year relevant to the assessment year 1959 60 the companypany claimed it as deductible expenditure for that year on the ground that the sum became payable only during that year when the government accorded its approval to the new agreement.
326 of the companypanies act the new agreement was sent to the central government for approval by a companymunication dated august 3 1957 enclosing a formal application for the purpose in form 25 on september 2 1957 by a letter addressed to the companypany the government companyveyed its approval to the appointment of m s. harrisons crosfields ltd.
m s. harrisons and crosfield limited have been the managing agents of the companypany from the beginning.
this was disclosed in the published accounts of the companypany for the year july 1 1955 to june 30 1956 relevant to the assessment year 1957 58.
b. ahuja and s. p. nayar for the respondent.
after the companypanies act 1956 came into force on april 1 1956 it was decided that there should be a fresh managing agency agreement between the companypany and its managing agents in companyformity with the provisions of the said act.
the new agreement proposed the reappointment of m s. harrisons crosfield limited as the managing agents of the companypany for a period of 10 years on a remuneration of 5 per cent companymission on the net profits of the companypany companyputed in the manner laid down in sections 349 to 351 of the companypanies act 1956 subject to a minimum remuneration of rs.
the companypany follows the mercantile system of accounting.
by special leave from the judgment order dated the 19th august 1968 of the madras high companyrt in tax case number 18 of 1 965.
as required by sec.
on receipt of the approval the companypany by a resolution adopted at an extraordinary general meeting of its shareholders held on october 4 1957 reappointed m s. harrisons crosfield limited on the terms stated above.
the revised terms were to take effect from april 1 1956.
b. pai a. g. manessea d. c. mathur and k. k. john for appellant.
a fresh agreement drawn up and submitted by the managing agents was approved by the companypany.
97188/ representing the managing agency remuneration for the period 1 4 1956 to 30 6 1957 was deductible in the companyputation of the income of previous year ending on 30th june 1958 relevant for the assessment year 1959 60.
civil appellate jurisdiction civil appeal number 1554 of 1970.
97188/ was shown as managing agents remuneration payable during that year.
for the assessment year 1959 60 for which the previous year was july 1 1957 to june 30 1958 a total sum of rs.
appeal.
there was however no written.
the appellant numbersuch estate limited is a public limited companypany incorporated in the year 1924 under the companypanies act 1913.
12000/ per annum for secratarial work.
the relevant facts leading to the reference are these.
agreement embodying the terms.
for the purpose of assessment of income tax however the company added back the said sum of rs.
for the period april 1 1956 to june 30 1956 the companypany credited a sum of rs.
9320/ to the account of the managing agents as their remuneration in accordance with the terms of the proposed new agreement.
as the managing agents for a period of 10 years with effect from 1st april 1956 on a remuneration of 5 per cent companymission on the net profits of the companypany companyputed in the manner as laid down in sections 349 to 351 of the companies act 1956 subject to a minimum remuneration of rs.
this amount was made up as under amount .lm15 proportionate remuneration for 3 months at 5 per cent on the net profits for the period ending on 30 6 1956 paid during the year ending on 30 6 1958 9320 remuneration at 5 per cent on the net profit of the year ending on 30th june 1957 paid during the year ending on 30 6 1958 71368 managing agents expenses for the year ending 30th june 1957 recouped during the year ending on 30th june 1958.13200 proportionate managing agents expenses for the year ending on 30th june 1956 recouped during the year ending on 30 6 19583300 97188.
the following question relating to the assessment year 1959 60 was referred to the high companyrt whether on the facts and in the circumstances of the case the sum of rs.
the income tax officer rejected this claim on the view that the approval of the central government was necessary only for actual payment and the assessee should have ascertained the liability for each year and claimed it on the mercantile basis which was the system adopted by the assessee companypany.
the appellant referred to hereinafter as the companypany derives its income from tea grown in its estate for which it is assessed to income tax.
9320/ to its taxable income.
the managing agents of the companypany were entitled to companymission at the rate of 11 per cent on all sales of tea and other produces of the companypany and a further sum of rs.
12000/ per annum.
the judgment of the companyrt was delivered by gupta j. this is an appeal by special leave from a judgment of the madras high companyrt in a reference under section 66 1 of the income tax act 1922.
