TaxTMI 
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2005 (11) TMI 198
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....ed in all these appeals is identical and common. Accordingly, these appeals were all heard together and are being disposed of by this consolidated order for the sake of convenience. Even learned representatives of parties addressed us with reference to appeals by Smt. Payal Kapur. 2. In the instant appeals, all the seven assesses are members of Jain Group, which comprises of six individuals (D.K Jain, Usha Jain, Priya Jain, Pankaj Jain, Pooja Jain and Payal Kapur) and, a company called JHPL Holdings (P.) Ltd. 3. The relevant facts of the case are that in the year under consideration, the assesses collectively had shown an aggregate receipt of Rs 69.50 crores as capital receipt from M/s. Gillette Inc, USA. In a note annexed to their returns of income, it was claimed that this amount was not "income" liable for taxation. In the said note, it was stated that on19-3-1996, the members of Jain Group entered into a Joint Venture Agreement (JVA) with M/s. Gillette India (P.) Ltd. (GIPL) to jointly pool their resources and strengths to carry on the business of manufacture and marketing of writing instruments and stationery products in India. It was stated that the mutual covenants entered....
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....nt venture company continued to carry and run its business, as it was hitherto doing. 3.3 It was, therefore, stated that amount so received by Jain Group was capital receipt and not liable to tax. In the aforesaid note, it was stated that although the sum received by the assessee is a capital receipt, it is not to be treated as capital gains as neither there was any capital asset and, nor there was a transfer of capital asset. 4. In the course of assessment proceedings, each of the assessee reiterated the stand taken in the return of income and, in support reliance was placed on six opinions of legal experts to the effect that the receipt under consideration is not exigible to tax, which we shall discuss later. It may be mentioned here that since the issue involved was identical, the cases of all the seven members of Jain Group were dealt in co-ordination by their respective three Assessing Officers and, a common text of the discussion and, determination was adopted for the purpose of assessments of all the assessees under section 143(3) of the Act. The Assessing Officer noted the features in the joint venture agreement in paras 3.15 and 3.16 which are reproduced below from the ....
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....financing of the joint venture business, issuance of share capital, transfer of shares, constitution of the board of directors, management, accounting, technical know-how and assistance, implementation by the parties, and consequences of termination (of the agreement) and its material breach. The Agreement inter alia provides that: (a) The parties agree that if any resolution is proposed (by the Board of Directors of the Company) which is contrary to the terms of the Joint Venture Agreement, the parties themselves shall vote against such resolution. (Refer clause 21.4 of article 21 of the JVA). (b) Each of the parties agree not to sell, transfer etc any of its shares in the Company in the first seven years without the prior written consent of the other party. (Refer article 7.1 of the JVA). (c) Any such sale or transfer etc. of shares shall constitute material breach of the Joint Venture Agreement. (Refer articles 20.10 and 20.11 of the JVA)." On the same date vide letter19-3-1996, M/s. Gillette Co., USA, holding company of GIPL had given an undertaking to Jain Group as stated in their letter. 5. In the order of assessment, the claim of the Jain Group was not accepted and i....
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....ss of manufacture and sale of writing instruments in India under the brand names of Luxor and Parker Pens was carried through the concern of D.K. Jain, namely 'Luxor Pen Company'. It was stated that above business was discontinued and it ceased to exist since19-3-1996. It was stated that other entities carrying on business of Jain Group were: (a) Tech Ink Industries, a proprietary concern of Mrs. Usha Jain continuing to carry on business manufacturing since 1990. (b) Luxor Export, a partnership firm in export business since 1992 having Mr. D.K. Jain, Usha Jain and, Pankaj Jain as partners. (c) Kakkar Bros., another partnership firm, engaged in manufacture and sale of metal pens since 1989-90, of which 50 per cent shares were held by Pooja Jain and Payal Kapur. (d) Khanjia Industries Engineering (P.) Ltd. a private limited company owned by Jain family running a SSI unit. 6.2 It was further stated that all the aforesaid firms had no connection with the business of LWIL, i.e. Joint venture company and, the private limited company was subsequently merged with LWIL. It was contended that Jain Group was not engaged in the business of setting up of joint ventures. It was ....
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....n view thereof, it was submitted that the impugned receipt is capital receipt and, not liable for tax. 6.3 The CIT (Appeals)-26 in his order held that on consideration of the facts of the assessee that it is too far fetched to say that assessee is engaged in the business of forming joint ventures. It was held that apart from handful of family concerns, the only other business in which members of Jain Group were partners is an old firm in Mumbai. They have not entered into any joint venture other than joint venture with Gillette Group. It was held that, joint venture agreement by itself cannot be held to be business of the assessee. It is an instrument to bind the parties to joint venture and, define their legally enforceable rights and obligations. It was held that it was a link to set up of business but not business in itself. It was held that there is a clear nexus between compensation received and, breach of agreement and, it had no nexus with the business of LWIL as would be evident from the consent and waiver agreement and, assignment and assumption agreement. It was held that, it would be ironic to say that, Gillette paid money to assessee in the year 2001 on account of form....
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....e activities singly as well as in conjunction with one or more of them, clearly tantamounted to carrying on of a business, profession or vocation. The contention that JVA was purely an investment agreement, according to learned CIT (Appeals) was rightly rejected by the Assessing Officer. This contention had no force as distribution of compensation bore no relation whatsoever to the share capital contributed by the parties. This fact further proved that parties to JVA did carry on business, profession or vocation and, therefore, received compensation different from their contribution. It followed that compensation was received by parties to the JVA for formation, promotion, management control and running of the joint venture. The learned CIT(A) agreed that even the activity of formation and promotion of a company could be termed as carrying on of a business, profession or vocation and motive of earning profit was not essential and did not make any difference that parties to JVA could not derive any profit except dividend on their share held in the companies. 6.6 Further, the CIT (Appeals) held that the determination whether the sum received constituted the capital receipt or busine....
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....by them from the joint venture business in the normal course. 6.7 The learned CIT(A) further observed that decision of Hon'ble Delhi High Court in the case of Ram Pros had, of Hon'ble Supreme Court in the cases of P. Krishna Menon, and of Dr. K. George Thomas v. CIT [1985] 156 ITR 412 (SC) and 159 ITR 851 relied upon by the Assessing Officer were clearly applicable to the facts of the case and the assessees before her could be said to have carried on vocation, if it is held that she did not carry on business or profession. She observed that there was close link between activities of assessee as a party to the JVA and the receipt in question and, therefore, concluded that provisions of section 28(i) were applicable in this case. 6.8 The learned CIT(A) also agreed with the Assessing Officer that receipt in question was not of a capital nature being compensation for an injury to the trading structure of the assessees. The joint venture agreement and joint venture company formed and promoted thereunder remained unaffected in all respects because of substitution of Gillette Company by Newell. There was no loss of capital to the structure of the company or their capacity to ear....
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....ture company. This clearly showed that JVA was not an investment agreement but a business agreement. In the end the learned CIT (Appeals) relied upon certain cases to support her conclusion which was that JVA was entered into by the Jain Group in the course of and for the purposes of business and compensation was received for breach of a business agreement and not for any loss to profit-earning apparatus of Jain Group. The disputed amount was liable to be taxed as receipt from business, profession and vocation. Accordingly, assessment made by the Assessing Officer was confirmed. 6.12 It is thus evident that the orders dated 2-6-2004 and 16-8-2004 by CIT(A)-26 and, CIT(A)-7 respectively are in respect of all the members of Jain Group other than Payal Kapoor and it has held that the impugned receipt of Rs. 69.50 crores is not taxable. However, in the case of Payal Kapoor, CIT(A)-23 in her order dated 18-2-2005 did not agree with the view taken by the other two CIT(A) and, for reasons stated in the order and, as noted above has held that Assessing Officer was correct in holding that receipt is a business receipt taxable under section 28(i) of the Act. In view thereof, six appeals are....
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....essees in accordance with the joint venture agreement and Joint investment in share capital cannot be called a business. It was submitted that joint venture agreement was a preliminary step to form a Joint Venture Company and, such a step could not tantamount to carrying on of business. In this connection, support was drawn from the judgment of Madras High Court in the case of Madras Fertilizers Ltd. that, setting up a factory may be a preliminary step and, an essential step but it cannot be said to be carrying on of the business itself, which principle stands affirmed by the Apex Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. 8.2 He submitted that the Joint Venture is not a firm or body of individual or association of person, a Private Limited Company, incorporated under the Companies Act to carry any business. The business was admittedly carried by LWIL. He submitted that, it is otherwise settled law that a shareholder in a company does not derive income from the business of the company and, any dividend received by him does not partake the character of income assessed in the hands of the company. He placed reliance on the judgment of Apex Courtin the case of....
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....h was being attempted by Jain Group. He contended that the amount paid was a fortuitous payment and was paid to buy peace and was settled through a negotiated settlement. He further submitted that mere formation of joint venture company cannot be construed to be business or an adventure in the nature of trade. He submitted that cases relied upon by the lower-authorities in the case of Ram Pros had and P. Krishna Menon's case are inapplicable. He placed great emphasis on the judgment of Apex Courtin the case of Oberoi Hotel (P.) Ltd. v. CIT [1999] 236 ITR 903 and, the decision of ITAT in the case of Sak Inds, copy placed in paper book at pages 202 to 230. He submitted that facts of the two cases are identical and, therefore, on the basis thereof, it cannot be held that receipt is a business receipt taxable under section 28(i) of the Act. Amount received was a capital receipt not liable to tax. 9. The learned DR on the other hand contended that the orders passed by two CIT (A)-7 and CIT (A)-26 are erroneous since they have been made in haste without granting fair and proper opportunity and, without application of mind. However, she contended that revenue strongly relies on the o....
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....d hence it was a pure business transaction and, payment was business receipt. Further, it has been stated that, it is not the case of the revenue that the assessees were engaged in the business of formation, management and control of joint ventures but the stand is that through this particular joint venture agreement, Jain Group and GIPL were conducting the business of LWIL and that joint venture agreement was entered in the course of the business and for purposes of business. Compensation received on facts of the case was a business receipt. 9.5 The learned DR has further placed reliance on the judgments in CIT v. G.R. Karthikeyan [1993] 201 ITR 866 (SC), Workmen Associated Rubber Industry Ltd. v. Associated Rubber Industry Ltd. [1986] 157 ITR 77(SC) and Juggilal Kamlapat v. CIT [1969] 73 ITR 702 (SC) that, in order to see whether this receipt of US $15 million was a taxable income, we have to lift the corporate veil and see the real intention of the parties to the JVA and, the real reason why a multinational company has parted with USD 15 million. It has been submitted that there is no document on record to show and support the premise that LWIL was distinct from the shareholder....
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....e's agreeing to withdraw their claims and disputes and, to give their consent to transfer of shares by Gillette to Newell. It was submitted that, learned DR has misread the Assignment and Assumption Agreement dated 17-1-2001. The payment made was independent of the said agreement. It was submitted that it cannot be contended that the clause regarding noncompetition and exclusivity was withdrawn. It was submitted that the learned DR has also factually erred in contending that, on incorporation of LWIL i.e., on 7-11-1995, the proprietorship business of Sh. D.K. Jain, M/s. Luxor Pen Company ceased to exist whereas the fact is that business of M/s. Luxor Pen Company ceased to exist only on signing of JVA on 19-3-1996 and, not on 7-11-1995. Therefore, the inference drawn that, business in normal course should have been carried on by LWIL from 7-11-1995 i.e., date of incorporation is also incorrect. 10.2 It was submitted that no submissions have been made on the judgment of the Apex Court in the case of Oberoi Hotel (P.) Ltd. and decision of ITAT in the case of Sak Inds (Del.) heavily relied upon by the assessee in support of the claim that the impugned receipt is a capital receipt.....
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....ceipt of a notice. There was something more to it. Another submission connected with this was the submission that corporate veil is required to be lifted in this case as profit belonged to and have been shared between members of Jain Group and Gillette. These two groups were owner of everything and managing the companies as provided in the JVA. LWIL and other companies were merely paper companies. We do not find any reason to accept and entertain these submissions. The Assessing Officer and on appeal CIT(A) decided the issue after considering provisions of JVA notices issued on behalf of Jain Group, consent and waiver agreement and other documents placed by the assessee on record. Genuineness, validity and veracity of documents referred to above was not disputed and doubted at any stage of the proceedings. It was not even alleged that payment in dispute was made not under the documents as claimed but under some other arrangement not brought on record. The learned D.R. was also vague and did not spell out what was the other arrangement. Suggestion is to imagine some arrangement, which on facts is not possible. There is no justification why company should not be taken a legal entity ....
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.... notified Gillette Co., USA vide notices dated 15-12-2000 that the aforesaid decision constituted material breach of the terms and conditions of JVA and, the undertaking dated 19-3-1996. It therefore called upon them to resolve the disputes through mutual conciliation, failing which Jain Group would refer the dispute to Arbitration under the Rules of International Chamber of Commerce, Paris as provided under JVA and seek suitable relief including the relief of specific performance of the rights and obligation of the parties in JVA as well as various undertakings given by the M/s. Gillette Co., USA. The material portion of the said notice is as under: "We wish to express our deep concern and anxiety and to lodge our protest against the proposed sale of Gillette Stationery products business to Newell Rubbermaid in the present circumstances. At the outset, we wish to record that no such sale can take place without our prior written consent and a settlement with the Jain Family, JHPL Holdings Pvt. Ltd. and Luxor Writing Instruments Ltd. Any such sale by the Gillette Company and its Stationery products business including trade marks and the Parker Pen Group writing material breach of ....
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....illing to enter into a good faith discussion for exploring the possibilities of releasing Gillette from its commitments and obligations. We, therefore, attended a meeting organized by Gillette with Mr. Thomas H. Beyer, the President of Sanford International in August to get introduced. Thereafter, meetings were arranged on 31st October and 1st November, 2000 in Lond on with Mr. Steve Issacs, Ms. Andrea Home and Mr. Thomas H. Beyer of Newell Rubbermaid. During these meetings, Mr. Beyer categorically stated that the terms of the JV Agreement as signed between Gillette and the Jain Group were unacceptable to Newell. Nothing material was discussed and no Agreement was reached. In fact, we are now informed that Mr. Beyer has since resigned. The JV Agreement between the Jain Group and Gillette was negotiated over a period of approx. 18 months. During this period, we held a very large number of meetings both in India and overseas and with a large number of Gillette executives from its various international divisions. The business plans were discussed and substantial time was spent in coming to know and understand one another. It is only after both the parties had satisfied themse....
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....as under: "CONSENT AND WAIVER AGREEMENT This Agreement is made on this 17th day of January, 2001 between The Gillette-Company, a Delaware Corporation, U.S.A. together with its affiliates ('Gillette') AND Mr. D.K. Jain, Ms. Usha Jain, Mr. Pankaj Jain, Ms. Payal Kapoor, Ms. Pooja Jain, Ms. Priya Jain and JHPL Holdings Pvt. Ltd. (all hereinafter collectively referred to as the ('Jain Group'). WHEREAS Gillette and the Jain Group had agreed to carry on the business in India of Writing Instruments and Stationery Products in a joint venture company and accordingly signed the Joint Venture Agreement dated19-3-1996. AND WHEREAS, Gillette on 21-8-2000 signed a Sale and Purchase Agreement with Newell Rubbermaid Inc. (together with its affiliates "Newell") and agreed to transfer to Newell Gillette's entire business and interest in the Writing Instruments and Stationery Products business internationally including Gillette's interest in the Joint Venture with the Jain Group. AND WHEREAS the Jain Group had declined to give their consent to the proposed sale and vide their letter of (December 15, 2000) gave notice to Gillette of disputes having arisen between t....
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....ant to any law on condition that such disclosures shall be to such an extent as necessary. IN WITNESS WHEREOF THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT ON THE DATE, MONTH AND YEAR FIRST ABOVE WRITTEN. The Gillette Company D.K. Jain for himself and, on behalf of Jain Family and JHPL Private Limited Sd/- Sd/- By: By: Name: Peter Mee Name: Title: Asst. General Counsel Title:" Under the aforesaid arrangement, the payments in dispute were made on the same date i.e., 17-1-2001. GIPL (later called Gillette Group India Limited) transferred and assigned all its interest in the joint ventures with Jain Group to M/s. Newell Rubbermaid as per tripartite agreement between three parties referred to above. The payment of Rs. 69.50 crores received in the above circumstances is claimed by the assessees as a non-taxable receipt whereas according to the department it is a revenue receipt liable to be taxed under section 28(i) of the Income-tax Act. The payment is documented and genuineness, validity and veracity of documents has not been challenged at any stage of the proceedings. This fact is to be emphasized as parties to the dispute are conversing different reasons for m....
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....as income from business or vocation. But it cannot follow as a general proposition that the formation of a company in every case is "business" and if an activity does not tantamount to carrying on a business it must be taken as a vocation are taxed as a return from occupation. The aforesaid decisions in our considered opinion have no application to the facts or controversy involved in the present case. In the case of Gillanders Arbuthnot & Co. Ltd. the assessee was carrying on business in veracity of agencies and dealing in diverse commodities. Compensation was paid to the assessee for termination of one of distributing agencies and was worked out on the basis of 3 successive years of passed commission. The assessee claimed that receipt was a capital receipt. Their Lordships of Supreme Court held that having regard to the vast array of business done by the appellant as agents, the acquisition of agencies was in the normal course of business done by the appellant as agents, the acquisition of agencies was in the normal course of business and determination of individual agencies a normal incident not affecting or impairing its trading structure. The amounts received by the appellan....
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....." The case is important for determining whether a compensation in a given case is capital receipt or a revenue receipt. In the case of CIT v. Rai Bahadur Jairam Valji [1959] 35 ITR 148 (SC) the assessee was paid compensation for termination of agency which was held to be a trading receipt by Their Lordships of Supreme Court. Their Lordships laid down important test for determining whether business in a given case is revenue receipt or a capital receipt. In both the cases noted above it was held that if assessee is receiving commission by holding various agencies which are assessee's trading assets then compensation receipt for termination of agency would be a trading receipt. It is evident from above that in the case of Gillander Arbuthnot & Co. Ltd. the assessee was not able to produce evidence to show that distributory agency cancelled was not one in which the assessee functioned as distributing agent. It was not even suggested that in the determination of the agency, trading structure of the assessee's business was impaired. In the other case Their Lordships of the Apex Court drew a distinction between agency contract and a trading contract. Agency contract was ....
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....er appeal Their Lordships of Supreme Court agreed with the Tribunal and held as under:- "As held by this court in Commissioner of Income-tax v. Chart and Chart Ltd., that ordinarily compensation for loss of office or agency is regarded as a capital receipt, but this rule is subject to an exception that payment received even for termination of an agency agreement would be revenue and not capital in the case where the agency was one of many which the assessee held and its termination did not impair the profit-making structure of the assessee, but was within the framework of the business, it being a necessary incident of the business that existing agencies may be terminated and fresh agencies may be taken. But it is for the income-tax department to clearly establish that the case fell within the exception to the ordinary rule. In the present case, according to the findings of the Tribunal, the termination of the agency in question had resulted in the destruction of a source of income of the company. The Tribunal had arrived at the conclusion that the managing agencies held by the company represented the source from which it received its income by way of commission." Their Lordship....
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....ntary agreement was executed between the appellant and the receiver of the Hotel and the property of Imperial Securities International (ISI) Limited, which, inter alia, provided that on 6-9-1975, a receiver was appointed of the undertaking and property of ISI pursuant to the terms of the debenture dated 7-1-1974, made between ISI on one part and Common Wealth Development Finance Company Limited on the other part. On the basis of the said appointment of the receiver, the receiver executed the supplemental agreement in favour of the appellant whereby the assessee had received a sum of Rs. 29,47,500 from the receiver after the sale of the hotel. The question, which was considered by the income-tax authorities, was whether the receipt of the said amount is capital receipt or revenue receipt. The Income-tax Officer arrived at a conclusion that it was a revenue receipt, the Commissioner of Income-tax (Appeals) held that it was a capital receipt, the Tribunal confirmed the said finding, on a reference to the High Court, the High Court arrived at a conclusion that it was a revenue receipt assessable to income-tax as business income for the assessment year 1979-80. Their Lordships of theApe....
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....ith GIPL. According to Jain Group, the JVA was an isolated agreement of unique type never entered into by Jain Group earlier with any body. Revenue has contested this proposition and accordingly it has been held that JVA was a business and commercial agreement and, therefore, compensation flowing from breach of such agreement is also a business/revenue receipt liable to be taxed. In our considered opinion, it has to be accepted that JVA was an isolated agreement entered into by Jain Group for the first time and it cannot be accepted that Jain Group was carrying on business of entering into such JVAs. It is not possible to accept on facts that Jain Group were entering into agreements with world renowned companies like Gilliete in the ordinary course of their business. It was an agreement entered into by Jain Group for purposes of business. JVA was a commercial deal providing respective rights and liabilities of parties relating to business agreed to be carried but it was not a "business". JVA may not merely be a memorandum of agreement not connected with the business as contended by the assessee. It was a commercial agreement. But it was not "business". We hold accordingly. 20. The....
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....definite or t or a long period, the contract under which it is obtained is Agency contract and not "business". It leads to business but not business. It is a structure to carry on the business. However, if the same assessee enter into contract for supply of 100 bags daily for a period of one month, such contract would be a trading contract entered into by the assessee in the normal course of business. Any compensation paid for loss caused to above trading contract would be a trading or revenue receipt. The compensation in the latter case is paid for an item which is stock-in-trade. So normally when an item is dealt with or is part of stock-in-trade, any receipt or compensation connected with such deal is a revenue receipt. But a trader or a manufacturer also has structure to carry on the trade like shop, factory, car, distribution agencies etc. etc. The structure - machinery, mechanism or structure with which trade is carried, are all capital assets and may be called business assets but cannot be taken to be "business". If above distinction and principles involved there in are kept in view, it is easier to resolve the controversy before us. 22. We have first to find whether JVA he....
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.... Detailed terms and conditions recorded in JVA have been referred to earlier. 25. The aforesaid quoted terms and conditions are sufficient to give us an idea as to what sort of asset flowed as per JVA. In our considered opinion, the terms and conditions leave no amount of doubt that JVA was a structure or foundation on which the joint business was to be built and carried. It provided mechanism or blue prints and defined role of the parties to the agreement and their commitment and also the manner in which business would be carried. The JVA could not be treated as "business" as admittedly business agreed to be carried was that of manufacture and sale of writing material and stationery. As noted in the case of Rai Bahadur Jairam Valji, it was capital asset invested in the business but not business itself. It was clearly a capital structure having two shades, one of Jain group and other of Gillette both having committed to provide not only finances but also management skill and even culture etc. etc. It could not be treated as stock-in-trade or a revenue asset. It was a capital asset. 26. Having reached the conclusion that JVA gave rise to rights which were capital in nature now the....
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....re of Gillette group out of joint venture, heavy loss had been caused to the assessee. The claim was accepted by the Gillette and compensation was paid. We do not know on what basis and on what material the revenue authorities could say that no loss was caused to the assessee. According to them it did not make any difference whether Gillette was a partner in the joint venture or Newell Rubbermaid. We are unable to agree. The revenue authorities have themselves admitted that they (Gillette) were world renowned companies with world renowned trade marks and trade brands. Their management, culture, Gillette Umbrella introduced in the joint venture and made available as per commitment was withdrawn contrary to the agreement. It is difficult to accept that no loss to the structure referred to above was caused on account of departure of Gillette group. This inference does not conform to the Notice issued by Jain group. As observed earlier, both the parties have accepted that loss was caused and one party paid compensation to the other party for the loss, breach and/or for giving consent and waiving rights under the JVA. Notice and waiver agreement have been extensively quoted and it is n....
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....le or acted upon and that compensation was paid for something else. But no case on lines above has been made out. No statement of parties to agreement was recorded nor any other material was collected to show that compensation was for any revenue loss caused to the assessees. In this background we see no reason to admit additional evidence filed on behalf of the assessees. We, further see no reason for holding that compensation received was a capital receipt not liable to tax. It is further clear from notice and waiver agreement that compensation was paid to Jain group for waiving their rights and for permitting Gillette to leave joint venture in breach of JVA. In the light of above, it is not possible to attribute compensation to anything else. There is direct reference to loss or damage caused to the trading structure on account of departure of Gillette. In the above circumstances, we see no reason to admit additional evidence filed by the assessee. 33. It is rather difficult to find decided cases having identical facts, but in our considered opinion, the decision of House of Lords in the case of Van Den Berghs Ltd. v. Clark (H.M. Inspector of Taxes) [1935] 3 ITR 17, the facts ....
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....sideration of the surrender of a fixed capital asset, but arose from a transaction attributable to circulating capital, and therefore an income receipt:" 34. On further appeal house of Lords noted about the agreement between the parties as under:- The circumstances in which the appellants received the payment which has now to be examined are set out in the Stated Case, from which I select the salient facts. The appellants were incorporated as a limited company in this country in 1895 and have since carried on the business of manufacturing and dealing in margarine and similar products on a very extensive scale both here and abroad. They had as their keenest competitors the Dutch Company, which was engaged in the same business in Holland. On February 13, 1908, the two companies entered into an agreement whereby they bound themselves for the future to "work in friendly alliance" and to share their profits and losses in conformity with an elaborate scheme detailed in the agreement. Each of the two companies had a controlling interest in a number of other companies and they undertook that, if either of them or any of the companies which they controlled should acquire an interest in a....