145 of 1958 and appellant in C. A. No.
PROVIDED THAT in numberevent the amount so given up by the said Firm shall exceed one third of such total amount of companymission And by Clause 5 it was provided The remuneration payable to the said Firm Under Clause 2 a shall be paid to the said Firm forthwith after the 31st day of December or such other date as the Directors may fix for the closing of the accounts of the Company in each year and after such accounts are passed by the Company in General Meeting .
The appellant in C. A. 145/58 is the Commissioner of Income tax, Bombay and the, respondent is the assessee, a registered firm, which on March 8, 1941, was appointed the Managing Agents of Shri Ambica Mills Limited hereinafter termed the Managed Company the appellant in C. A. 323/57.
For the accounting years 1950 and 1951 i.e. assessment years 1951 52 and 1952 53 the Managing Agents were taxed by the Income tax Authorities on the basis that in those two years they had voluntarily relinquished a sum of Rs.
145/58 and C. A. 323/57.
Appeals by special leave from the judgment and order dated September 14, 1955, of the Bombay High Court in I.T. References, Nos.
for the year ending December 31, 1950.
The duration of the Managing Agency period was 20 years.
Ganapathi Iyer and D. Gupta, for the appellant in C.A. No.
The Judgment of the Court was delivered by KAPUR, J. This judgment will dispose of two appeals, C. A. No.
By clause 2 of the Managing Agency Agreement it was provided 2 a The Company shall pay each year to the said Firm either the companymission of 5 five per cent.on the total sale proceeds of yarn, and of all cloth, manufactured from companyton, silk, jute, wool waste and other fibres and sold by the companypany, or a companymission of three pies per pound avoirdupois on the sale, whichever the said Firm choose to take, and also a companymission of 10 ten per cent.
per annum on the capital paid up on the ordinary shares for the time being, the same Firm shall be bound to give up from the total amount of companymission payable under clause 2 a hereof such portion thereof as may be necessary to make up the deficit.
CIVIL APPELLATE JURISDICTION Civil Appeals Nos.
1,69,981 and Rs.
145 of 1958, and respondent in C. A. No.
An appeal was then taken to the Income tax Appellate Tribunal and it was held by the Tribunal that the agreement between the Managing Agents and the Managed Company to receive remuneration at 3 on the total sales was a valid one and took effect as from January 1, 1950.
on the bills of any ginning and pressing factories and on any other work done by the Company.
The resolution of the Board of Directors was ratified at an Extraordinary General Meeting of the shareholders of the Managed Company on October 7, 1951, and the same day a formal agreement embodying the terms of the resolution was executed between the Managing Agents and the Managed Company.
If in any year the net profits of the Company shall number be sufficient to enable the Directors, if they think fit, to recommend a dividend of eight per cent.
on the proceeds of sale of all other materials sold by the Company and 10 ten per cent.
It was also argued that the Managing Agents by entering into an agreement with the Mills had voluntarily relinquished a portion of the amount of companymission which had accrued to them and therefore the whole of the income from companymission which had already accrued was liable to income tax and reference was made to the cases reported as Commissioner of lncome tax, Madras v. K. R. M. T. T. Thiagaraja Chetty and Co. 1 , E. D. Sassoon Company Ltd. The Commissioner of Income tax, Bombay City 2 and to an English case Commissioners of Inland Revenue v. Gardner Mountain D Ambrumnil Ltd. 3 .
145/58 and 323/57.
In the appeal by the Commissioner of Income tax, i.e. C. A. 145/58, it was argued that according to the terms of the Agency Agreement the Managing Agents were to get the companymission on the sales and as the accounts were kept on a mercantile basis, the amount of companymission accrued as and when the sales took place and paragraph 5 of agreement was only a machinery for quantifying the amount.
A. Palkhivala, S. N. Andley, J. B. Dadachanji and Rameshwar Nath, for the respondent in C. A. No.
But these cases have numberapplication to the facts of the present case.
This appeal by the appellant has been brought against the judgment of the High Court by special leave.
323 of 1957.
8 and 21 of 1955 respectively.
February, 19.
These sums were added to the income of the Managing Agents for the purpose of income tax.
on sales instead of 5 per cent.
323 of 1957. ,
On December 9, 1950, the Board of Directors of the Managed Company passed a resolution to the effect that the Directors had for some time past been discussing with the Managing Agents the advisability of modifying the terms of the Managing Agency Agreement as to the companymission payable under it and that the Managing Agents had agreed to charge 3 per cent.
2,10, 53O for the respective assessment years.
A resolution was passed at the Annual General Meeting of the Managed Company on April 22,1951, which was to the same effect.
