The Income tax Officer included the sums of Rs.
As regards the companymission, the Income tax officer held that it had become due to the appellant at the end of the accounting year of the managed companypany, and if the companymission had been foregone after it had become due, it was taxable on accrual basis.
38,719/ for the assessment year 1956 57 and Rs.
1,963/ for the following year.
13,963/ in the total income of the appellant for the two assessment years in question.
Besides these amounts, the appellant was entitled to Rs.
As a result of foregoing the amounts of the managing agency companymission, according to the Tribunal, the financial position of the managed companypany did number become stronger while that of the appellant companypany became weaker.
On behalf of the appellant, it was stated that the managed companypany had been suffering heavy losses in the past years and, therefore, the appellant did number companysider it proper to charge any companymission or the fixed office, allowance and had companysequently relinquished the same.
Appeals from the judgment and order dated January 28, 1964 of the Calcutta High Court in Income tax Reference No.
The Annual General Meetings of the managed companypany were held to adopt the accounts on November, 24, 1955 and July 21, 1956 respectively with regard to the assessment years in question.
The managed companypanys accounting year closed on the 30th day of December and that of the appellant companypany on the 30th day of June every year.
The above claim was rejected and it was observed that the total loss carried over at the end of year 1955 of the managed companypany was Rs.
13,963/foregone by the assessee by its Directors resolution dated 4 4 1955 and 19 6 1956 respectively, were liable to be included in its total income for the accounting years ending 30 6 1955 and 30 6 1956 ?
According to the Tribunal, the companymission became due to the appellant yearly on the last day of the accounting year of the managed companypany, though the actual payment was deferred to a later date.
13,963/ for the two years.
The Income Tax Officer took the view that in so far as the fixed office allowance was companycerned, it had been given to the appellant to enable it to recoupe the expenses incurred on behalf of the managed companypany and the relinquishment was, therefore made ex gratia.
14,95,221/ .
50,719/ and Rs.
50,719/ and Rs.
The total amounts which the appellant was entitled to receive from the managed companypany were Rs.
12,000/ per annum for each of the two years as fixed office allowance.
Postponement of the actual payment after the income had accrued was held to be inconsequential.
12,000/ for each of the two years.
If the answer to question No.
In the relevant years, the managed companypany suffered losses and companygruently the companymission payable at 121/2 of the net profits was nil but the companymission on purchase of companyton at the rate of 1 1/2 and on sales of cloth and yarn at the same rate, aggregated to Rs.
The Appellate Assistant Commissioner and the Income tax Appellate Tribunal affirmed the order of the Income tax Officer.
CIVIL APPELLATE JURISDICTION Civil Appeals Nos.
So far as the first question is companycerned, we find that according to clause 2 e of the Managing Agency Agreement reproduced above, the companymission for the two years in question became due to the appellant on the 31st day of December, 1954 and 31st day of December, 1955.
2083 and 2084 of 1970 which have been filed on certificate granted by the Calcutta High Court and are directed against the Judgment of that Court whereby it answered the questions referred to the Court under Section 66 1 of the, Indian Income tax Act, 1922 hereinafter referred to as the Act for two assessment years against the assessee appellant and in favour of the respondent.
The Judgment of the Court was delivered by Khanna,J. This judgment would dispose of two Civil Appeal.s Nos.
At the instance of the appellant, the Tribunal referred the following two questions to the High Court Whether on the facts and in the circumstances of the case, the sums of Rs.
1,000/ per mensem plus a companymission at the rate of 121/2 of the net profits, an additional companymission of 1 on all purchases of companyton and an equal amount on all sales of cloth and yarn.
The amounts of companymission in terms of the above clause were due on 31st December, 1954 and 31st December, 1955 and were payable immediately after the 24th of November, 1955 and 21st of July, 1956 respectively.
50,719/ and Rs.
Claim was ten made by the appellant that the amount relinquished should be treated as a permissible expenditure under section 10 2 of the Act.
The relinquishment was companysequently held to be number for the benefit of the appellant.
The appellant also became entitled to receive fixed office allowance of Rs.
According to the above clause, the companymission was due on the 31st day of December every year and it was payable imme diately after the annual accounts of the managed companypany had been passed in the General Meeting.
2093 and 2084 of 1970.
The appellant companypany relinquished the managing agency companymission for the assessment year 1956 57 as per resolution dated 4th of April, 1955 of the Board of Directors and for the following year as per resolution dated 19th June, 1956.
Likewise, the relinquishment of the income after it had become due in the opinion of the Tribunal, was inconsequential.
104 of 1960.
The amounts of the companymission were thus relinquished after they had become due but before they were payable in terms of clause 2 e of the agreement.
Clause 2 e of the Managing Agency Agreement dated 30th ember 1946 companytained the following term as to when the companymission would be due and payable The said companymission shall be due to the Agents yearly on the thirty first day of December or any other date on which the Companys yearly account close in each and every year during the companytinuance of this Agreement and shall be payable and be paid immediate after annual accounts of the said Company has been passed by the Board of Directors and Auditors of the Company and by the companypany in, General Meeting.
The appellant Company was appointed as the Managing Agent of Shree Ramesh Cotton Mills Ltd., Morvi hereinafter referred to as the managed companypany , as per agreement dated 30 12 1946.
Under the terms of the agreement, the appellant companypany was entitled to receive a fixed office allowance of Rs.
The assessee is a Limited Company and the matter relates to the assessment years 1956 57 and 1957 58, the companyresponding accounting years for which ended on June 30, 1955 and June 30, 1956 respectively.
1 be in the affirmative, whether the assessee is entitled to claim an allowance of an equivalent amount as expenditure under the provisions of Section 10 2 xv of the Indian Income Tax Act ?
T. Desai, P. L. Juneja and R. N. Sachthey, for the respondent in both the appeals .
The managed companypany was a 100 subsidiary of the appellant companypany.
P. Maheshwari, for the appellant in both the appeals .
