1962 (3) TMI 6

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....nding to the previous year ending March 31, 1948. The assessee-firm consisted of three partners, Shoorji Vallabhdas and his two sons, Pratapsinh and Vikramsinh, The assessee-firm was the managing agents of several shipping companies including the Malabar Steamship Co. Ltd., and the New Dholera Steamships Ltd. With the Malabar Steamship Co. Ltd. the assessee-firm had entered into an agreement on September 16, 1938 (modified on December 7, 1943), and with the New Dholera Steamships Ltd. on June 8, 1946. Under these agreements, the assessee-firm was entitled to receive as its commission, 10 per cent. of the freight charged. Between April 1, 1947, and December 31, 1947, the amount of commission at the rate of 10 per cent. of the freight was Rs.....

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....mpany, we shall voluntarily agree to a reduction in the managing agency commission both in respect of the current year as also in future years as may be mutually agreed between the board and ourselves or between the company and ourselves to the extent of 2 1/2 per cent. of the total freight. " A similar procedure was followed in the case of the New Dholera Steamships Ltd., though all the documents are not in the record. On December 30, 1947, extraordinary general meetings of the two managed companies were held, and the two private limited companies were appointed as the managing agents from January 1, 1948. It appears, therefore, that the offer contained in the letter of the assessee-firm was accepted. Later, at the annual general meeti....

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....e Commissioner of Income-tax to the High Court, and they were : " (1) Whether the two sums of Rs. 1,36,903 and Rs. 2,00,625 are income of the 'previous year' ended March 31, 1948 ? (2) If the answer to the first question is in the affirmative, whether they represent an item of expenditure permissible under the provisions of section 10(2)(xv) of the Indian Income-tax Act, 1922, in computing the assessee's income of that 'previous year' from its managing agency business ? " The High Court agreed with the view of the President, and answered the first question in the negative, and declined to answer the second. The case was, however, certified as fit under section 66A(2), and the present appeal has been filed. The contentions before us ....

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....revious year. It was, however, made final on April 8, 1951, at a meeting of the board of directors, but that was beyond the previous year. The High Court of Bombay held that by reason of the resolution during the currency of the previous year, the right of the assessee to commission ceased to be under the original agreement and depended upon and arose only after the decision of the board of directors to reduce the commission. The assessee was, therefore, not held liable on the larger sum which, it was held, was only a hypothetical income, which it might have earned if the old agreement had continued to subsist. The facts of the present case are almost identical, and the principle applied by the Bombay High Court governs this case. The reaso....