COMMISSIONER OF INCOME TAX BOMBAY NORTH IN C A NO 145 OF 1958 AND SHRI AMBICA MILLS LIMITED IN C A NO 323 OF 1957 Vs. HARIVALLABHDAS KALIDAS AND CO IN C A NO 145 OF 1958 AND COMMISSIONER OF INCOME TAX BOMBAY NORTH IN C A NO 323 OF 1957

JUDGEMENT

(1.) This judgment will dispose of two appeals, C. A. No. 145/58 and C. A. 323/57. They arise out of the same transaction i.e., Managing Agency Agreement and the result of C. A. No. 323/57 is dependent upon the judgment in C. A. 145/58 and we propose to deal with the latter appeal which was argued before us and the former for reasons to be stated later was not pressed. The appellant in C. A. No. 145/58 is the Commissioner of Income-tax, Bombay and the respondent is the assessee, a registered firm, which on March 8, 1941, was appointed the Managing Agents of Shri Ambica Mills Limited (hereinafter termed the Managed Company) the appellant in C. A. 323/57. The duration of the Managing Agency period was 20 years. By clause (2) of the Managing Agency Agreement it was provided:-

(2.) In the connected appeal i.e. C. A. 323/57 by the Managed Company the facts are the same except that the Appellate Tribunal allowed the Managed Company the sum on which the Managing Agents were to be taxed as allowable deduction. When the Commissioner got the case stated to the High Court the Managing Company also had a case stated. But as the High Court upheld the contention of the Managing Agents the Managed Company did not press its application which was therefore dismissed. The appeal of the Managed Company is brought against that order.

(3.) In the appeal by the Commissioner of Income-tax, i.e., C. A. 145/58, it was argued that according to the terms of the Agency Agreement the Managing Agents were to get the commission on the sales and as the accounts were kept on a mercantile basis, the amount of commission accrued as and when the sales took place and paragraph 5 of agreement was only a machinery for quantifying the amount. It was also argued that the Managing Agents by entering into an agreement with the Mills had voluntarily relinquished a portion of the amount of commission which had accrued to them and therefore the whole of the income from commission which had already accrued was liable to income-tax; and reference was made to the cases reported as Commissioner of Income-tax, Madras vs. Thiagaraja Chetty and Co., (1954) SCR 258 ; E. D. Sassoon and Co. Ltd. vs. Commissioner of Income-tax, Bombay City, (1955) 1 SCR 313 and to an English case Commissioners of Inland Revenue vs. Gardner, Mountain and D'Ambrumenil Ltd., (1949) 29 Tax Cas 69. But these cases have no application to the facts of the present case.