19,796/ out of the amount claimed by the respondent.
The respondent had to use its best 1 20 I.T.R. I. endeavour to buy as cheaply as possible within the ceilings prescribed and to sell it for such maximum price as may be obtainable, number being below the price prescribed by the Government, to re sell tobacco which the Government may direct it to sell by instructions in writing, in such manner and at such price as may be specified by the Government, and to finance the entire transaction of purchasing tobacco in the first instance out of its own funds.
The respondent had entered into a profitable companytract, but any negligence in purchasing, storing, packing, transporting and shipping the goods might have resulted in serious losses to the respondent.
Goods purchased by the respondent if number of the grade or quality were liable to be rejected by order of the Tobacco Grading Inspector.
After providing Rs.
On June 22, 1951 the respondent passed a resolution placing T.M. Ayyadurai in special charge for arranging purchases of tobacco on credit, inspecting tobacco at Guntur and at Madras Port, and for supervising shipment of tobacco, and agreed to pay him 30 per cent of the net profit as remuneration.
Appeal from the judgment and order dated August 24, 1961 of the Madras High Court in Case referred No.
4,800/ per annum for attending to the business of the Company.
215 of 1964.
1,38,454/ became due to the respondent as companymission in the account year ending March 31.
for tobacco redried.
This amount was taken into account by the Income tax Officer in companyputing the income of the respondent in the assessment year ending March 31.
and companymission on all purchases.
M. Ayyadurai, T.M. Rangachari and P.C. Chakrabarti were directors of the Company.
The companytract to purchase tobacco on behalf of the Government of India was apparently out of the way of the numbermal business of the respondent and demanded the setting up of a special organisation.
Niren De, Additional Solicitor General, R. Ganapathy Iyer and R.N. Sachthey, for the appellant.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
and disallowed Rs.
The managing agency agreement of the respondent with the Nellore Power and Light Company Ltd., was terminated with effect from September 28, 1951 when the Government of the State of Madras in exercise of the powers companyferred upon it by the Electrical Undertakings Acquisition Act, 1949 companypulsorily ac quired the undertaking of that Company, and the respondent was paid Rs.
Each director was paid a fixed remuneration of Rs.
102 of 1957.
Appeals against the order passed by the Income tax Officer to the Appellate Assistant Commissioner and to the Tribunal challenging the disallowance of part of the companymission and inclusion of companypensation for termination of the managing agency agreement were unsuccessful.
Under the companytract with the Government of India Rs.
The Income tax Officer accepted that the expenditure for payment of remuneration for attending to the companytract was laid out for the purpose of the business of the respondent, but reduced the stipulated rate to 10 per cent on two grounds that T.M. Ayyadurai was the brother of M. Rangachari, and that he was, as a director of the Company, bound to attend to all the activities of the Company including the companytract.
Thiagarajan, for the respondent.
41,473/ for expenses, 30 per cent of the balance being Rs.
for tobacco number redried, and at the rate of two annas per lb.
It carried on business in hides and skins, minerals, tobacco and other companymodities, and also acted as managing agents for the Nellor Power and Light Company Ltd. and for two other Companies.
The Judgment of the Court was delivered by Shah, J. The respondent is a private limited Company.
The respondent had to place a go down at the disposal of the Government within their premises at Guntur.
29,094/ was paid to T.M. Ayyadurai as companymission and was claimed in the assessment year 1952 53 as a permissible deduction under s. 10 2 xv of the Indian Income tax Act, 1922.
storing.
transporting, retaining and reselling tobacco under and in accordance with the directions issued from time to time.
The Income tax Officer allowed only 10 per cent of the net profit for the services rendered by T.M. Ayyadurai in the companytract for tobacco purchase and sale.
The Central Government agreed to pay to the respondent price of the tobacco purchased, charge at the rate of one anna per lb.
On June 21, 1951 the respondent was appointed by the Central Government as its agent for buying, checking, weighing, leaf drying.
