Remuneration payable only for services rendered: no liability arose when managing agents did not manage the company.

Where the governing articles entitled managing agents to remuneration only for services actually rendered, no liability accrued for a period in which they rendered no service. The Rajasthan HC held that article 75 allowed 16% of net profits as remuneration for managing agents' services, and not otherwise. Because the agents, owing to mutual differences, did not manage the company during 13 September 1956 to 31 December 1956, the company was not legally bound to pay remuneration for that period. The issue was answered against the assessee and in favour of the Revenue.

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Issues: Whether the assessee-company was liable in law to pay remuneration to its managing agents for the period from 13 September 1956 to 31 December 1956 under article 75 of the articles of association.

Analysis: Article 75 entitled the managing agents to receive 16% of the net profits of the company as remuneration for their services and not otherwise. During the relevant period, because of mutual differences, they rendered no service to the company. On the terms of the articles, remuneration was payable only for services actually rendered, and no liability could arise for the period when the agents were not managing the company.

Conclusion: The assessee-company was not liable to pay remuneration for the period from 13 September 1956 to 31 December 1956. The issue was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: Where remuneration under the governing articles is payable only for services rendered, no liability accrues for a period during which the agents render no service.

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