TaxTMI 
TaxTMI 
1966 (9) TMI 169
X X X X Extracts X X X X
X X X X Extracts X X X X
.... two managing directors of a private limited company by name Textile Corporation Private Limited. The other managing director was one P. D. Asher. Out of the total of 20 shares or Rs. 100 each, the assessee held nine shares and his son one share, the remaining shares being held by P. D. Asher, his wife and cousin. This company was the managing agent of a public limited company called Asher Textiles Ltd. Both these companies have been incorporated under the provisions of the Indian Companies Act, 1913. The public limited company had issued 11,986 shares of the face value of Rs. 100 each, out of which the assessee held 1,674 shares. The book value of these shares was Rs. 1,11,625. P. D. Asher, his wife and into an agreement on December 21, 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e basis of the average rates of Income Tax and super-tax for the three years immediately preceding the relevant previous year but declined this benefit in respect of the other amount. The Appellate Assistant Commissioner gave the benefit of that method of computing the tax for the sum or Rs. 72,515 as well. While the Income Tax Officer did not specify the particular clause of section 10(5A), the Appellate Assistant Commissioner was of the view that the two amounts were liable to tax under clause (c) of that sub-section. He accepted the view that the amounts in excess of the book value of the shares transferred by the assessee were in the nature of inducement to him or compensation for giving up the management. The assessee preferred an appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0(5A), though we form our view for slightly different reasons. Sub-section (5A) of section 10 is a follows : (5A) Any compensation or other payment due to or received by, - (a) a managing agent of an Indian company at or in connection 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 substantially 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 cond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o them in the Indian Companies Act, 1913. Under section 2(9A) of the Indian Companies Act, "managing agent" means a person, firm, or company entitled to the management of the whole affairs of a company by virtue of an agreement with the company, and under the control and direction of the directors except to the extent, if any, otherwise provided for in the agreement and includes any person, firm or company occupying such position by whatever name called. An Explanation to this definition says that if a person occupying the position of a managing agent calls himself a manager for the purposes of the Act. Section 2(9) defines a "manager" to be a person who subject to the control and direction of the directors has the management of the whole a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h will govern the scope of the expression "manager" in clause (b) of sub-section (5A) of section 10 of the Income Tax Act, 1922. One of the requisites of a person being a manager is that he should be entitled to manage the whole affairs by himself. 5. Clause (c) will obviously be inapplicable because, as the Tribunal rightly held, that contemplates a company other than an Indian company. Realising this, learned counsel for the revenue turned to clause (d) and contended that this counsel would in any case be attracted. We fail to see how, if clause (b) will not apply for the reason we mentioned. The same logic will not govern the scope of clause (d) as well. For this clause to apply the assessee must be holding an agency relating to the b....