Agency and business income: commission-based general management was treated as carrying on business and taxed accordingly.

The appellants were agents, not servants, because the agency arrangement vested them with general conduct and management of the company's business, including contractual authority, staff control, sub-delegation and limited dealings with the company, subject only to overall supervision by directors. The commission basis of remuneration and the power to assign the agency were inconsistent with a contract of service. Their continuous and organised managerial activities amounted to carrying on business, since business is not confined to dealings with multiple principals. The remuneration therefore constituted income, profits or gains from business and was liable to excess profits tax.

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Issues: (i) Whether the appellants were servants of the company or its agents under the agency arrangement; (ii) whether the remuneration received by the appellants constituted income, profits or gains from business and was liable to excess profits tax.

Issue (i): Whether the appellants were servants of the company or its agents under the agency arrangement.

Analysis: The arrangement gave the appellants general conduct and management of the company's business subject only to overall control and supervision of the directors. They were not under direct control as to the manner and method of work, had authority to enter contracts, appoint and remove staff, sub-delegate powers, deal with the company in certain transactions, and hold office for a long fixed term. The commission basis of remuneration and the power to assign the agency were also inconsistent with a mere contract of service.

Conclusion: The appellants were agents of the company and not servants.

Issue (ii): Whether the remuneration received by the appellants constituted income, profits or gains from business and was liable to excess profits tax.

Analysis: Business is not confined to dealings with multiple principals, and incorporated companies may carry on business through continuous and organised activities. The appellants' work involved numerous and recurring acts of general management, and their objects included agency business. The continuity and scope of the operations, together with the character of the remuneration and the nature of the agency, showed that the activities amounted to carrying on business.

Conclusion: The remuneration was income, profits or gains from business and was assessable to excess profits tax.

Final Conclusion: The appeals failed because the appellants were held to be agents carrying on business, and the commission received by them was taxable as business income.

Ratio Decidendi: A company or firm entrusted with the general management of another concern's business, exercising substantial discretion in continuous and organised operations and receiving commission-based remuneration, may be regarded as carrying on business rather than rendering mere services, and its earnings are business income.

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