Reassessment and apportionment of managing agency commission upheld where profits escaped assessment and contract performance spanned accounting periods.

Reassessment was valid where definite information showed that excess profits tax had escaped assessment because the original assessment wrongly assumed the chargeable accounting period matched the company's accounting period, causing under-assessment. The managing agency commission was also required to be apportioned under the statutory rule because the contract's performance extended beyond the relevant accounting periods and the profit had to be attributed to the periods to which it was properly referable. An earlier case on accrual of income was distinguished as dealing with a different statutory setting. The assessments were sustained and the assessee's challenges failed on both issues.

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Issues: (i) whether the taxing officer was entitled to reopen the assessment for 1945-46 under the reassessment provision; (ii) whether the managing agency commission was liable to be apportioned under rule 9 of Schedule I of the Excess Profits Tax Act.

Issue (i): Whether the taxing officer was entitled to reopen the assessment for 1945-46 under the reassessment provision.

Analysis: The assessment had proceeded on the footing that the chargeable accounting period and the company's accounting period coincided. That assumption produced an under-assessment of excess profits tax when the commission income was originally brought to tax without proper allocation to the relevant chargeable accounting period. The statutory condition for reopening was therefore satisfied, because definite information had shown that profits chargeable to excess profits tax had escaped assessment or been under-assessed.

Conclusion: The reopening was valid and the point was decided against the assessee.

Issue (ii): Whether the managing agency commission was liable to be apportioned under rule 9 of Schedule I of the Excess Profits Tax Act.

Analysis: Rule 9 applies where the performance of a contract extends beyond the accounting period and requires attribution of the profits arising from complete performance in the proportion properly attributable to the relevant period. The managing agency arrangement was for a fixed term and its performance extended across the relevant accounting periods. The remuneration, though payable by reference to annual profits, was earned under a contract whose performance cut across the accounting periods. The earlier decision relied on by the assessee was distinguished because it dealt with accrual of income under a different setting and did not concern apportionment under rule 9.

Conclusion: The commission was rightly apportioned, and the point was decided against the assessee.

Final Conclusion: The assessments were sustained, and the appeals failed on both substantive questions.

Ratio Decidendi: Where a contract's performance extends beyond an accounting period, the profits arising under it must be apportioned to the relevant periods under the statutory apportionment rule, and reassessment is permissible when the original assessment has under-assessed chargeable profits on a mistaken assumption about the relevant accounting period.

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