PARVATHANENI RAMAKRISHNAYYA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) UNDER Section 66 (1) of the Indian Income-tax Act, the Income-tax Appellate Tribunal referred the following question for decision of this Court:

(2.) THE clause under which his liability to pay 33 1/3 per cent, of the profits arises leaves no room for doubt that it is out of the entire profits that this amount is to be paid to the company. THE net profits of his business are treated as profits belonging to him and to be wholly enjoyed by him. It is from that amount that this 33 1/3 per cent, should be paid. If once profits are received by the assessee as his profits their destination is irrelevant. It is not a case where the net profits should, be arrived at after deducting the 33 1/3 per cent which has to be paid to the company. We do not suggest thereby that if it was so done, it would have been an expenditure within Section 10 (2) (xv) of the Act, and it is unnecessary for us to decide that question. It is rather difficult, therefore. In view of the clear language of the resolution to accept the contention urged by Mr. Srini-vasan, the learned advocate for the assessee, that it should be treated as a permissible deduction. THE view taken by the revenue authorities is, in our opinion, correct and they were right in not permitting this deduction. THE answer, therefore, to the question referred to us must be in the negative and against the assessee. As the assessee has failed, he must pay costs of Rs. 150 to the Income-tax Commissioner.