TaxTMI 
TaxTMI 
1975 (11) TMI 1
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....reafter entered into a separate managing agency agreement with the managed company for a period of seventeen years. The appellant's only source of income was this managing agency in the relevant year. Mulraj and his group also held among themselves 25,000 ordinary and 10,000 preference shares of the Elphinstone Spinning and Weaving Mills Ltd. Mulraj entered into an agreement for sale of these shares with K.D. Jalan of Calcutta for a consideration of Rs. 45 lakhs; one of the terms of the agreement was that Mulraj would have the managing agency of the appellant-company terminated. In implementation of this agreement Mulraj wrote to the appellant-company on October 21, 1953, asking the company to give up the managing agency on receipt of a sum....
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....n with the termination or modification of his managing agency agreement with the company; (b) a manager of an Indian company at or in connection with the termination of his office or modification of the terms and conditions relating thereto; (c) any person, by whatever name called, managing the whole or subtantially the whole affairs of any other company in the taxable territories, at or in connection with the termination of his office or the modification of the terms and conditions relating thereto; (d) any person, by whatever name called, holding an agency in the taxable territories, for any part of the activities relating to the business of any other person, at or in connection with the termination of his agency or the modification....
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....ived by the managing agent as profits and gains of a business and does not create a fresh source therefor, and as the amount in question in this case was received in the accounting year relevant to the assessment year 1955-56, it was taxable in the assessment year 1955-56. The Tribunal, however, agreed with the Appellate Assistant Commissioner that the assessee was entitled to a deduction of Rs. 6 lakhs which the assessee had paid for acquiring the managing agency, and allowed the appeal partly holding that the assessee was liable to pay tax on the sum of Rs. 3,95,000. At the instance of the parties the Tribunal referred the following two questions to the High Court under section 66(1): " (i) Whether the sum of Rs. 10 lakhs is income asse....
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.... so made up: ". As stated already, sub-section (5A) of section 10 came into force on April 1, 1955 ; therefore, the amount in question, if received by the assessee during the previous year for the assessment year 1955-56 would be taxable under that sub-section. By a legal fiction introduced by sub-section (5A) any amount received by a managing agent as compensation for the termination of his managing agency agreement which would otherwise have been a capital receipt is to be deemed as profits and gains of a business carried on by the managing agent. The appellant contends that sub-section (5A) indicates that this deemed income is to be treated as receipt from a new source and, that being so, the relevant previous year for this income woul....