Minimum commission under managing agency agreement treated as accrued income; deduction denied absent actual waiver.

A minimum commission of Rs. 25,000 under a managing agency agreement was treated as accrued income because the clause guaranteed that amount where profits were insufficient, so the right to receive it arose in the relevant year. The alternative deduction claim failed because the Tribunal found no actual waiver or conscious surrender of the amount; without such surrender, deduction on grounds of commercial expediency was unavailable. Both referred questions were answered against the assessee.

---

---

Issues: (i) Whether the sum of Rs. 25,000 was assessable in the assessee's hands as income under the managing agency agreement; (ii) Whether the said sum, if accrued, was allowable as a deduction on the footing of waiver or surrender on grounds of commercial expediency.

Issue (i): Whether the sum of Rs. 25,000 was assessable in the assessee's hands as income under the managing agency agreement.

Analysis: The remuneration clause entitled the managing agent to 15% of the net profits with a minimum amount of Rs. 25,000 in case of inadequacy of profits. Read as a whole, the clause fixed a minimum commission payable to the assessee irrespective of the exact level of profits, and the right to receive that amount accrued in the relevant year.

Conclusion: The sum of Rs. 25,000 was assessable in the hands of the assessee as income.

Issue (ii): Whether the said sum, if accrued, was allowable as a deduction on the footing of waiver or surrender on grounds of commercial expediency.

Analysis: The finding of the Tribunal was that there was no actual waiver of the amount by the assessee. In the absence of a conscious surrender, the claim to deduction on grounds of commercial expediency could not arise.

Conclusion: The deduction claim was not allowable and the issue was answered against the assessee.

Final Conclusion: Both referred questions were answered against the assessee, and the reference was disposed of accordingly.

---