TaxTMI 
TaxTMI 
1955 (9) TMI 54
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.... up a statement of the case and refer it to the High Court of Judicature at Bombay under section 66(1) of the Indian Income-tax Act, 1922. 2. The assessment year is 1951-52, the relevant accounting year being the calendar year 1950. The assessee is a registered firm constituted of 20 partners. The following are 3 out of the said 20 partners:- 1. Madanmohan Mangaldas. 2. Madhusudan C. Parekh. 3. Indrajit Chamanlal Parekh. These 3 partners were directors of Girdhardas Harivallavdas Mills, Ltd. Under a managing a agency agreement dated 7th September, 1940, the assessee firm was appointed as its managing agents. Under clause 2(b) of the agreement the assessee was entitled to a commission of 3½% on the sale proceeds of all ....
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....at the lesser remuneration than that specified above should be paid to the agents for any of these two years the directors of the company shall have the right in their absolute discretion to fix such a lesser remuneration either by way of a lump sum or a reduced percentage for any of these two years and the agents shall be bound to accept such lesser remuneration so fixed by the directors of the company for any of these two years." This resolution was accepted by the assessee and a letter of the same date was sent to the managed company and it was agreed that, in pursuance of the said resolution and the acceptance thereof by the assessee, necessary variation in the managing agency agreement would be made in due course. A copy of this let....
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....Rs. 2,05,575-3-0 but as per resolution 1,05,575 only is credited to the account of agents." A copy of the board's resolution dated 8th April, 1951, is annexure 'D' and forms part of the case. 6. Thus there is a dispute between the Department and the assessee as to the taxability of the sum of Rs. 1 lac, being the difference of the two items of commission stated above. The Department held that the entire sum of Rs. 2,05,575 was the assessee's income it having accrued or arisen to it as commission during the "previous year" for the assessment year under consideration and the mere voluntary surrender of the sum of Rs. 1 lac or the mere acceptance of the lesser amount of Rs. 1,05,575-3-0 would not in any way affect the tax....
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....he case the amount of Rs. 1 lac in dispute was also income of the assessee and was changeable to tax in its hands? 9. The parties agree that all facts stated are correct and that no fact necessary for the drawing up of the statement of the case has been left out. The parties agree to the statement of the case as finalised and submitted. The Advocate-General withG. N. Joshi, for the Commissioner N. A. Palkhivala with Sir J. B. Kanga, for the assessee JUDGMENT CHAGLA, C.J.- The very short question that arises for our decision on this reference is: what was the income of the assessee company in respect of the managing agency commission earned by it for managing the managed company, the Girdhardas Harivallavdas Mills? The asse....
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....d company accepting this resolution and agreeing that an agreement in variation of the agreement dated 7th September, 1940, in terms of the resolution passed by the extraordinary general meeting will be made between the assessee company and the managed company and pursuant to this agreement an agreement was arrived at on the 17th March, 1951, a where this resolution passed by the managed company was embodied in the managing agency agreement. On the 8th April, 1951, a meeting of the board of directors resolved that in accordance with the resolution passed by the extraordinary general meeting and also in accordance with the agreement of the 17th March, 1951, the managing agents should accept a commission of Rs. 1,05,575-3-0 instead of Rs. 2,0....
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.... the 7th September, 1940, at the rate of 3?% but their right depended upon the opinion of the directors which would be based upon the working of the managed company. Therefore, it is only on the 8th April, 1951, when the board of directors decided after considering the working of the managed company that the assessee company should receive Rs. 1,05,575-3-0 and not Rs. 2,05,575-3-0 that the right of the assessee company to their commission arose. It would be fallacious to suggest that till the board of directors resolved what commission the managing agents should receive there was any right in the managing agents to receive bay specific amount. Undoubtedly if no resolution of the December 28, 1950, had been passed and the managing agents had....