Deeming fiction for managing agency compensation fixes the business head of charge but does not create a new income source.

Section 10(5A) deemed compensation for termination of a managing agency agreement to be profits and gains of business, but only for charging it under the business head; it did not create a new and independent source of income. The receipt remained attributable to the original managing agency business, so the relevant previous year was that of the same business source under section 2(11). The compensation was therefore assessable in assessment year 1955-56, and the deeming fiction was confined to converting a capital receipt into taxable income without altering its source.

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Issues: Whether compensation received on termination of a managing agency agreement was assessable as income in the assessment year 1955-56 under section 10(5A) of the Indian Income-tax Act, 1922, and whether that deeming provision created a new and independent source of income.

Analysis: Section 10(5A) deemed compensation for termination of a managing agency to be profits and gains of a business, but the deeming fiction was confined to converting what would otherwise be a capital receipt into income chargeable under the business head. It did not treat the termination itself as a new source of income. The receipt remained attributable to the managing agency business, and the relevant previous year was therefore the same previous year as that business. Section 2(11) governed the concept of previous year for the separate source of income.

Conclusion: The compensation was taxable in the assessment year 1955-56 and was not income from a new and independent source; the answer was against the assessee and in favour of the Revenue.

Final Conclusion: The deeming provision under section 10(5A) only fixed the head of charge for the compensation and did not create a separate source of income, so the receipt fell to be assessed with the managing agency business.

Ratio Decidendi: A deeming provision that converts a capital receipt into taxable income for a specified business head does not by itself create a new source of income; the receipt remains referable to the original business source for purposes of the previous year and assessment.

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