Managing agency remuneration treated as business income where effective control and conduct of the enterprise were transferred to the recipient.

A managing agency arrangement that entrusted the assessee with the full conduct and management of the mills' affairs, subject only to general control, was treated as a business undertaking rather than a contract of service. The terms on tenure, remuneration, termination, delegation, and winding up supported the conclusion that the assessee was neither a servant nor a mere employee, but an agent carrying on managing agency business. The remuneration was therefore income from business and not salary, and its assessment as business income under the excess profits tax regime was upheld.

---

---

Issues: Whether the remuneration received by the assessee under the managing agency arrangement was income from business or salary as an employee, and whether the High Court was right in treating it as business income under the excess profits tax law.

Analysis: The arrangement between the trustees and the assessee, read as a whole, showed that the assessee was entrusted with the full conduct and management of the mills' affairs and selling agency, subject only to general control. The terms relating to tenure, remuneration, termination, delegation of powers, and winding up were consistent with a business undertaking and not with a contract of service. The assessee was therefore neither a servant nor a mere employee but was carrying on a managing agency business. The legal position of such delegation was also consistent with the rule governing agency under the Indian Contract Act.

Conclusion: The remuneration was income derived from business and not salary; the question was correctly answered against the assessee.

Final Conclusion: The appeals failed, and the assessment of the managing agency receipts as business income under the excess profits tax regime was upheld.

Ratio Decidendi: Where an agreement transfers the effective conduct of an agency business to the recipient of remuneration, subject only to general control, the recipient is an agent carrying on business and not a servant earning salary.

---