TaxTMI 
TaxTMI 
1969 (2) TMI 15
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....t) Ltd. had appointed as their selling agents in India four companies, viz., (1) Gillanders Arbuthnot and Co. Ltd., Calcutta, (2) Best and Co. Ltd., Madras, (3) Anglo-Thai Co. Ltd., Bombay, and (4) Shaw Wallace and Co. Ltd. With effect from 1st April, 1948, the I.C.I. (Export) Ltd. terminated the services of the aforesaid selling agents and appointed the assessee as its sole selling agent. The I.C.I. (Export) Ltd. had agreed to pay to the former selling agents compensation at the rate of two-fifths, two-fifths and one and two-fifths of the commission earned by the assessee for the three years from 1st April, 1948. The compensation was paid to the four companies through the accounts of the assessee. For this purpose the modus operandi adopted was as follows: The compensation payable to the former agents was spread over a period of three years and on the assumption that the turnover was constant, the compensation, payable to the selling agents was, on an average, an amount equal to the 11/15ths of the commission earned by the assessee at the normal rates. In order to arrive at the amount of commission to be credited to the assessee's profit and loss account each year the assessee in ....
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....n during the first two years, it should have credited that amount whereas the assessee had actually credited four-fifteenths on a notional basis which was not in consonance with the arrangement. The conclusion reached by the Appellate Tribunal was that " there was no agreement between the assessee and the I.C.I. (Export) Ltd. and " if there was one it was not acted upon ". It was held by the Appellate Tribunal that the payment of compensation was not because of an overriding title created either by the act of parties or by operation of law. At the instance of the assessee the following question of law was referred to the High Court under section 66(1) of the Income-tax Act, 1922 (hereinafter called the Act): 'Whether the inclusion by the Income-tax officer of Rs. 2,03,503, Rs. 5,41,526, Rs. 5,29,284 and Rs. 4,00,052 in the assessment for the years 1949-50, 1950-51, 1951-52 and 1952-53 for the relevant accounting years ending the 30th September 1948, 1949, 1950 and 1951, respectively, in the computation of the total income of the assessee is justified and correct ?" The High Court answered the question in the negative in favour of the assessee holding that the inclusion of the....
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.... letter merely explains the method of accounting adopted by the assessee and did not carry the matter any further. In the circumstances, the Appellate Tribunal held that there was no agreement between the assessee and the I.C.I. (Export) Ltd. and if there was any such agreement it was not acted upon. It is manifest that the finding of the Appellate Tribunal on this question is a finding on a question of fact and the High Court was not entitled to interfere with this finding. It is well established that the High Court is not a court of appeal in a reference under section 66 (1) of the Act and it is not open to the High Court in such a reference to embark upon a reappraisal of the evidence and to arrive at findings of fact contrary to those of the Appellate Tribunal. It is the duty of the High Court while hearing the reference to confine itself to the facts as found by the Appellate Tribunal and to answer the question of law in the context of those facts. It is true that the finding of fact will be defective in law if there is no evidence to support it or if the finding is perverse. But in the hearing of a reference under section 66(1) of the Act it is not open to the assessee to cha....
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....ll goods after 1st April, 1948, and for getting that right the assessee parted with a portion of its commission for the first two years after 1st April, 1948, and paid very much more than the commission earned in the third year. This position was borne out by the accounts of the respondent which show that the assessee received the commission at full rates and out of it created a reserve account of which these compensations were made to the ex-agents. We have, already referred to the finding of the Appellate Tribunal that no agreement between the assessee and the I.C.I. (Export) Ltd. has been proved. In the absence of proof of the exact terms and conditions of the agreement it is not possible to accept the argument of the assessee that the amount paid as compensation to the ex-agents was an " expenditure laid out wholly and exclusively for the purpose of the business " under section 10(2)(xv) of the Act. It was finally contended on behalf of the respondent that by virtue of an overriding title the income was diverted before it reached the assessee, and so, the amount of compensation paid to the ex-agents did not form part of the income of the assessee. In other words, the contenti....
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....appellant at all. This in their Lordships' opinion is the true view of the matter. When the Act by section 3 subjects to charge 'all income' of the individual, it is what reaches the individual as income which it is intended to charge. In the present case the decree of the court by charging the appellant's whole resources with a specific payment to his step-mother has to that extent diverted his income from him and has directed it to his step-mother ; to that extent what he receives for her is not his income. It is not a case of the application by the appellant of part of his income in a particular way, it is rather the allocation of a sum out of his revenue before it becomes income in his hands. " Another case of the Judicial Committee is reported in P. C. Mullick v. Commissioner of Income-tax, where a testator appointed the appellants as executors and directed them to pay Rs. 10,000 out of the income on the occasion of his addya sradh. The executors paid Rs. 5,537 for such expenses and sought to deduct the amount from the assessable income. The Judicial Committee confirmed the decision of the Calcutta High Court disallowing the deduction and observed that the payments were ma....