agarwal and companypany received from the e. d. sassoon united mills limited a sum of rs.
the sassoons applied under section 66 1 of the indian income tax act and section 21 of the excess profits tax act requesting the tribunal to draw a statement of the case and refer the question of law arising out of the orders to the high companyrt for its decision.
120000 the company was to pay to them a sum sufficient to make up the minimum remuneration of rs.
bhagwati j. these appeals arise out of two judgments and orders of the.
sassoons and that they were therefore liable to be assessed only in respect of the balance of the remuneration referable to the portion of the calendar year 1943 subsequent to the respective dates of the assignments.
this reference was made by the tribunal in r.a.
the question referred by the tribunal in each of the three cases was the same and is as follows whether in the circumstances of the case was the managing agency companymission liable to be apportioned between the assessee companypany and the assignee or assignumber as the case may be .
in spite of the objection of the sassoons the income tax officer and the excess profits tax officer determined these sums as their escaped incomes and assessed them accordingly.
the transferees appealed to the appellate assistant companymissioner who confirmed the orders of the income tax officer.
120000 per annum on account of such companymission.
all these references came for hearing and final disposal before the high companyrt.
appeal from the judgment and order dated the 12th day of september 1951 of the high companyrt of judicature at bombay in income tax reference number 27 of 1951 arising out of the order dated the 23rd day of numberember 1949 of the income tax appellate tribunal in income tax appeal number 122 of 1947 48.
the said companymission was under clause 2 d to be due to them yearly on the 31st of march in each and every year.
the managing agency was transferred with the consent of the companypany by e. d. sassoon and companypany to the sassoons and anumberher managing agency agreement was executed between the companypany and the sassoons on the 2nd october 1934 appointing and recognising the latter as the agents of the companypany from the lst january 1921 for the residue of the period and upon the same terms and companyditions set out in the original agreement dated the 24th february 1920.
the letter dated the 3rd september 1943 recording the agreement of transfer of the managing agency provided that in the event of the transaction being company pleted in its entirety as therein stated the transferees would be entitled to receive the companymission payable by the company under the managing agency agreement in the profits for the calendar year 1943.
number 474 of 1950 51 and r.a.
d. sassoon and companypany limited hereinafter refered to as the sassoons were the managing agents of 1 e. d. sassoon united mills limited under agreements dated the 24th february 1920 and the 2nd october 1934 2 elphinstone spinning and weaving mills companypany limited under the agreement dated 23rd may 1922 and 3 apollo mills limited under the agreement dated the 23rd may 1922.
following upon this judgment the high companyrt also answered in the affirmative the question which had been referred to it by the tribunal in income tax reference number 23 of 1951.
this reference was income tax reference number 23 of 1951.
under clause 1 of that agreement the sassoons and their assigns were appointed the agents of the companypany for a period of 30 years from the date of the registration thereof and thereafter until they resigned or were removed from office by a special resolution of the companypany.
3 30 and 31 of 1953.
under clause 3 of the agreement the companypany was during the continuance thereof to pay to the sassoons their successors and assigns by way of remuneration a companymission of ten per cent.
the deed of transfer executed by the sassoons in favour of chidambaram mulraj and companypany limited on the 2nd june 1943 stated that the sassooins assigned and transferred the agreement dated the 23rd may 1922 between themselves and the companypany for the unexpired residue of the term of sixty years specified therein and the full benefit and advantage thereof together with the benefit of the agency and the office of the agents thereunder and the right to receive the remuneration thereafter to become payable by the companypany under or by virtue of the said agreement and together with the benefit of all rights privileges powers and authorities given and conferred on the sassoons there under.
ever be the position as between the companypanies and the transferees the sassoons had number earned any part of the managing agency companymission which had been paid by the companies to the transferees and were number liable to tax in respect of the same.
meanwhile presumably by way of caution the income tax authorities issued numberices to the assignumber company viz.
the statement of the case was accordingly submitted by the tribunal on the 12th january 1951 and the same question as above was referred to the high companyrt.
sassoon united mills ltd.
income tax references number.
5780000 rs.
for chidambarams the assessment year was 1945 46 and the chargeable accounting period was from 1st july 1943 to 30th june 1944.
191304 in respect of the managing agency of the apollo mills limited for the period of six months from the 1st january 1943 to the 30th june 1943 companytending that such managing agency companymission had accrued to the sassoons for services rendered so that on the dates on which the agencies were transferred the sassoons were entitled to such remuneration from the managed companypanies in the form of commission for services rendered up to the dates of the transfers.
the high companyrt answered the question against the sassoons and in favour of the other two.
it was therefore companytended that the sassoons had number earned any companymission for the broken periods and that number having earned the same they companyld number have assigned it to the transferees with the result that when the transferees were paid the companymission under the terms of the managing agency agreements the transferees received the same in their own right even though they had number rendered the services to the companypany for the whole of the calendar year 1943.
237602 and the rajputana textile agencies limited received from the apollo mills limited a sum of rs.
the judgment of das and bhagwati jj.
23 24 and 27 of 1951 made by the income tax appellate tribunal under section 66 1 of the indian income tax act and section 21 of the excess profits tax act.
under clause 3 the sassoons and their assigns agreed with the companypany that they.
the objection was overruled and the assessments were made.
was entered into on the 24th february 1920 by sir edward sassoon and others carrying on business in partnership in the style and form of messrs.
would be and act as the agents of the company during the said term for the said remuneration and upon and subject to the terms and companyditions therein contained.
it was on the other hand urged on behalf of the transferees that even though under the terms of the deeds of assignment and transfer they were paid by the companypanies the whole of the managing agency companymission for the calendar year 1943 they had merely earned the companymission or remuneration for the period of actual services rendered by them to the company and the portions of the managing agency companymission proportionate to the services actually rendered by the sassoons to the companypanies had accrued to the sassoons though it had been ascertained and paid to the transferees in the year 1944.
the original agreement entered into by the elphin stone spinning and weaving mills companypany limited was with messrs.
the sassoons objected to this before the income tax.authorities but the objection was overruled.
52 at p. 59.
the incometax appellate tribunal relied upon its order dated the 28th december 1949 in the case of the transferees and confirmed the orders of the appellate assistant company missioner.
agarwal and companypany and chidambaram mulraj and companypany limited respectively were civil appeal number 30 of 1953 and civil appeal number 31 of 1953.
the sassoons were assesse for this escaped income on the basis that they had earned the income by rendering services as managing agents to the companypanies for the respective periods that they companytinued to be the managing agents and the transferees had rendered the services for the balance of the periods companypleting the full year of accounting and had earned the proportionate companymission and therefore the amount of companymission which the latter actually received included the sassoons share of companymission in respect of which they were number liable to tax but the sassoons.
agarwal and companypany chidambaram mulraj and companypany ltd.
the appeals of the companymissioner of income tax against messrs.
sassoon and companypany.
officer appear to have discovered that the amounts of the managing agency companymission earned by the sassoons prior to the dates of the respective transfers were number brought to tax and therefore issued on the 29th june 1946 numberices under section 34 of the indian income tax act and section 15 of the excess profits tax act upon the sassoons on the ground that their income from the managing agency had escaped assessment.
under clause 6 the sassooris their successors and assigns were to be at liberty to retain reimburse and pay themselves out of the moneys of the companypany inter alia all sums due to them for companymission and otherwise.
it is significant to observe that before the incometax authorities as also the high companyrt numberdistinction was drawn between the provisions of these two agency agreements in regard to the right of the managing agent to remuneration thereunder and the facts in so far as they related to all the managing agencies were treated as similar.
during the companytinuance of the agreement and was to be payable and to be paid immediately after the annual accounts of the companypany had been passed by the shareholders.
it was companytended that in any event what.
the deed of assignment and transfer executed between the sassoons and messrs.
it may be numbered that even though the letter recording the agreement of transfer expressly provided that the transferees would be entitled to receive the companymission payable by the companypany under the managing agency agreement on the profits for the calendar year 1943 numbersuch term was incorporated in the deed of assignment and transfer.
the companymissioner of income tax excess profits tax bombay city also required the tribunal to refer to the high companyrt the question of law arising out of its order in the appeal of messrs.
civil appfllate jurisdiction civil appeals number.
the companysent of the shareholders of the respective companypanies to the agreements for transfer was duly obtained and the managing agencies were ultimately transferred to the respective transferees with effect from the 1st december 1943 1st june 1943 and 1st july 1943 respectively.
on their objection being overruled the sassoons filed an appeal to the income.
in the first of the appeals the income tax companymissioner supports the position taken up by the sassoons while in the other two the companymissioner is the appellant and companytests the position taken by the agarwals and the chidambarams.
hajee mahomed hajee esmail and companypany to the sassoons and on the 23rd may 1922 anumberher managing agency agreement was executed by the companypany in favour of the sassoons their successors and assigns employing them the agents of the company pany from the 1st february 1922 for the unexpired period of the term of 60 years companymencing from the 3rd july 1919.
agarwal and companypany in which the tribunal had held as above that the managing agency companyniission should be apportioned between the sassoons and the transferees.
sassoons under section 34 of the indian income tax act and assessed it in respect of the proportionate part of the years managing agency companymission up to the date of the respective assignments.
number 475 of 1950 51 referring the question of law thus framed in regard to the managing agency companymission of the d. sassoon united mills limited and the elphinstone spinning and weaving mills ltd.
agarwal and companypany chidambarain mulraj and companypany limited and rajputana textile agencies limited formal deeds of assignment and transfer and received from them rs.
the whole of the managing agency companymission having been paid respectively to messrs.
even though the asceertainment and the payment came later it made numberdifference which companyld be referred to the accrual of the income back to the period during which the income was earn limitedd and accordingly whatever amount was earned by me the sassoons during the respective periods that they had acted as the managing agents of the companypanies had accrued to them during those periods and was received by the transferees only by virtue of the respective deeds of assignment and transfer.
1500 per month.
for the assessment year 1944 45 and the chargeable accounting period 1st january 1943 to the 31st december 1943 the original income tax and excese profits tax assessments of the sassoons were made or the 31st may 1945 at a total income of rs.
agarwal and companypany in pursuance of this agreement on the 26th january 1945 stated that the sassoons thereby transferred to messrs.
agarwal and companypany and to chidambaram mulraj and companypany limited in the year 1944.
the sassoons executed in favour of messrs.
whether in the circumstances of the case was the managing agency companymission liable to be apportioned between the assessee companypany and the assignee observing that in its opinion the question was number when the managing agency commission accrued but the real question was to whom it accrued.
it may be mentioned that the rajputans textiles agencies limited does number appear to have filed any appeal to the tribunal.
n. shroff with him for therespondent in c. a. number 30 r. j. kolah n. a. palkhiwala and i. n. shroff for the respondent in c. a. number 3 1.
382608 as and by way of such commission.
the decision of the high companyrt was thus against the companytentions which had been urged both by the sassoons and the companymissioner of income tax and the sassoons as well as the companymissioner of income tax obtained leave under section 66a 3 of the indian income tax act and section 133 1 c of the companystitution for filing appeals to this companyrt.
was delivered by bhagwati j. jagannadhadas j. delivered a separate judgment.
ferees companytention that the managing agency companymission received by them should be apportioned on a proportionate basis and the transferees should be made liable to pay tax only on the companymission earned by them during the period that they had worked as the managing agents of the respective companypanies.
7577693 received by them on such transfers was taken by them to the capital reserve account.
the quantum also was number disputed in each case though the principle of apportionment was in dispute.
tax appellate tribunal the tribunal by its order dated the 28th december 1949 accepted the trans.
the tribunal rejected the appeal in view of the decision they had already given in the appeals filed by the two assignee companies agarwals and chidambarams.
the appeal of the sassoons was civil appeal number 3 of 1953 and it was filed against the companymissioner of income tax bombay city.
for sassoons and agarwals the assessment year was 1944 45 and the accounting year was the calendar year 1943.
clause 10 of the agreement provided as under it shall be lawful for the said firm to assign this agreement and the rights of the said firm hereunder to any person firm or companypany having authority by its companystitution to become bound by the obligations undertaken by the said firm hereunder and upon such assignment being made and numberified to the said companypany the said companypany shall be bound to recognise the person or firm or companypany aforesaid as the agents of the said companypany in like manner as if the name of such person firm or companypany had entered into this agreement with the said companypany and the said companypany shall forthwith upon demand by the said firm enter into an agreement with the person firm or companypany aforesaid appointing such person firm or companypany the agents of the said companypany for the then residue of the term outstanding under the agreement and with the like powers and authorities remuneration and emoluments and subject to the like terms and companyditions as are herein companytained.
udder clause.
2851934 made up of rs.
hajee mahomed hajee esmail and companypany and was dated the 24th july 1919.
on the net profits of the companypany and a further sum of rs.
j. m. mackenna d. h. dwarka das and rajinder narain with him for the appellant in c. a. number 3 of 1953.
on the 12th january 1951 the tribunal by its statement of the case referred to the high court one question of law as arising out of its orders viz.
the managing agency was transferred with the companysent of the companypany by messrs.
tax appellate tribunal.
this was income tax reference number 27 of 1951.
30 and 31.
the tax was assessed on the basis number of receipts but of accrual.
what the high companyrt held was in substance that 1 the managing agency remuneration for the year in question accrued as the joint income of both the assignumber and the assignee and was apportionable between them and 2 the assignee companies received the assignumbers share of the joint income by virtue of the assignments of the assignumbers share and hence to that extent it was number their taxable income but companytinued to be the taxable income of the assignumber there are thus three appeals one by the sassoons against the income tax companymissioner and the other two by the income tax companymissioner against agarwals and chidambarams respectively.
on appeals to the income tax appellate tribunal their companytention was accepted and the assessments were modified.
the income tax officer and the excess profits tax.
agarwal and companypany as from the lst december 1943 their office as managing agents of the companypany for the unexpired residue of the term created by the said agreement dated the 24th february 1920 as also the said agreements dated the 24th february 1920 and the 2nd october 1934 and all their rights and benefits as managing agents under the said agreements and messrs.
24 and 27 of 1951 were heard together and one judgment was delivered answering the question submitted to the high companyrt in both the references in the affirmative.
the income tax authorities treated the total remuneration for the entire year 1943 in each case as income which accrued to the assigneecompanies in the respective accounting periods.
agarwal and companypany agreed to be the managing agents of the companypany from the 1 st december j 943 in place and stead of the sassoons for the said unexpired residue of the term with like powers authorities remuneration and emoluments as were companytained in the said agreements.
99001 in respect of the managing agency of the elphinstone spinning and weaving mills limitedfor the period of five months from the 1st january 1943 to the 31st may 1943 and rs.
the original agreement with the e.d.
the accounts of the managing agency companymission payable by the respective companypanies to the managing agents for the year 1943 were made up in the year 1944 and messrs.
c. setalvad attorney general for india g. n. joshi and a. mehta with him for the respondent in c. a. number 3 and for the appellant in c. a. number.
the three companypanies companycerned obtained references to the high companyrt under section 66 of the indian income tax act.
2561629 in respect of the managing agency of the e. d. sassoon united mills limited for the period of 11 months from the 1st january 1943 to the 30th numberember 1943 rs.
the income tax officer and the excess profits tax officer wanted to include in the assessable income of the sassoons rs.
k. daphtary solicitor general for india r. j. kolah a. palkhiwala and 1.
this income however did number include any part of the managing agency companymission received by the transferees.
600000 respectively on transfers of the manaoing agencies and the net consideration viz.
this reference was income tax reference number 24 of 1951.
2794504 chidambaram mulraj and company limited received from the elphiiistone weaving and spinning mills companypany limited a sum of rs.
this sum was brought into the profit and loss account as a trading receipt and the companytention of the assessee was that in companyputing his profits he was entitled to charge the sum of i 2500 being the purchase price of the cherries sold for pound 2903 which sum had been brought into credit as a trading receipt.
2 the remuneration of the sassoons and their assigns was fixed at a companymission of 71/2 per cent.
high companyrt of judicature at bombay in income tax references number.
1250000 and rs.
4648483.
the entire amounts of the managing agency companymission received by the transferees were assessed by the income tax officer for the assessment year 194546 as the income of the transferees.
and rajputana textile agencies limited respectively by letters dated the 3rd september 1943 16th april 1943 and the 27th april 1943.
wher the matter was taken in further appeal to the income.
the sassoons agreed to transfer their managing agencies of the said companypanies to messrs.
a similar application was made by the companymissioner of income tax excess profits tax bombay city for reference in the appeal of chidambaram mulraj and companypany limited the tribunal submitted its statement of case also on the same day and referred the very same question to the high companyrt.
may 14.
the assignee companies objected on the ground that part of the remuneration up to the date of the respective assignments accrued to the assignumber company viz.
the sassoons appealed to the appellate assistant companymissioner who dismissed the appeals and further appeals were taken to the income tax appellate tribunal.
the tribunal was of the opinumber that the managing agency companymission was earned for services rendered and therefore it was taxed in the hands of the person who carried on the business of the managing agency and number in the hands of the person to whom it was assigned and that therefore so far as the sassoons were companycerned the managing agency companymission should be apportioned between them and their transferees.
per annum on the annual net profit of the companypany after making all proper allowances and deductions from revenue for working expenses charge the able against profits provided however that if in any year numbersuch commission was earned or it fell short of rs.
