Section 10(5A) applies only to statutory managing agency relationships, not to a managing director acting outside that status.

Section 10(5A) of the Income-tax Act, 1922 applied only to compensation or other payments received on termination or modification of a managing agency, managerial office, or similar agency relationship. The provision covered a managing agent, manager, person managing the whole or substantially the whole affairs of a company, or a person holding an agency in the taxable territories for business activities of another. A managing director who was only one of two directors was not the managing agent in his own right, and the managing agency vested in the company, not in the individual. As the assessee did not fall within any statutory category, the sums received on transfer of shares were not assessable under section 10(5A).

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Issues: Whether the sums received on transfer of shares were assessable under section 10(5A) of the Income-tax Act, 1922 as compensation or other payment received on termination or modification of the assessee's managing agency, managerial office, or agency.

Analysis: Section 10(5A) applied only where the recipient was a managing agent of an Indian company, a manager of an Indian company, a person managing the whole or substantially the whole affairs of any other company, or a person holding an agency in the taxable territories for any part of the activities relating to the business of any other person. The assessee, as one of two managing directors, was not himself the managing agent of either company within the statutory meaning, nor was he the manager of the company's whole affairs. The managing agency vested in the corporate entity, not in the individual director. Clause (c) did not apply because the company in question was an Indian company, and clause (d) also failed because the assessee did not hold an agency in his own right for the business of any other person. The payments therefore could not be treated as profits and gains deemed under the sub-section.

Conclusion: The amounts were not assessable under section 10(5A) and the reference was answered in favour of the assessee.

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