Managing Agent Income treated as business profits, not salary; therefore assessable under section 10 instead of section 7.

Income received by a firm for acting as managing agents and as sole selling agents is characterised as profits and gains of business rather than salary because the role of a managing agent does not necessarily create a servant-employer relationship; the contractual relationship controls. The firm was a partnership formed to carry on the managing and agency business, it performed continuing management and sales functions, and no terms made it a servant. Therefore such receipts fall within business income under the Income-tax Act and are assessable as business profits rather than salary.

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Issues: Whether the income received by a firm for acting as managing agents and sole selling agents of a company is income from salary (assessable under section 7) or profits and gains of business (assessable under section 10) of the Income-tax Act.

Analysis: The definitions of managing agent and manager show a managing agent need not be a servant; the nature of the contractual relationship determines whether payments are remuneration as salary or business profits. A firm constituted under the Partnership Act is formed only for carrying on a business; the partnership deed here expressly stated the firm's business was to float and obtain the managing agency and to manage the company's affairs. The firm's activities involved continuing management and sales agency functions after incorporation, and no contractual terms were shown that made the firm a servant of the company. The same considerations apply to the sole agency work. The meaning of "business" in the Partnership Act and the Income-tax Act align so that profits from the firm's managing and sole agency activities fall within profits and gains of business.

Conclusion: The income derived by the firm from acting as managing agents and as sole selling agents is income from business and is assessable under section 10 of the Income-tax Act, not as salary under section 7.

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