COMMISSIONER OF INCOME TAX Vs. NAGI REDDY B

JUDGEMENT

(1.) THIS reference arises out of the assessment of one Nagi Reddy to income-tax for the assessment year 1956-57, the relevant "previous year" being the calendar year 1955. He received in the year of account Rs. 72,426 and Rs. 5,142 as remuneration from the two companies, "Vijaya Productions Ltd." and "B. N. K. Press Ltd." respectively, of which he was the managing director. He claimed that this was business income assessable to tax under section to of the Act. THIS was not accepted by the Income-tax Officer, but on appeal, the Appellate Assistant Commissioner upheld the claim. The department filed an appeal to the Income-tax Appellate Tribunal which held that the amount is not to be dealt with under section 10 of the Act, but granted relief to the assessee in allowing a sum of Rs. 29,485 to be set off against the profits of the year. Both the assessee and the department filed an application under section 66 (1) of the Act before the Tribunal, and the following questions stand referred to us :

(2.) IF the answer to the above question is in the negative, whether the depreciation allowance of Rs. 29,485 unabsorbed in the assessment of 1955-56 is available to be included in the computation of the profits from business for the year 1956-57 under proviso (b) to section 10 (2) (vi) ?"

(3.) THE agreement of the assessee dated August 27, 1951, with B. N. K. Press Ltd. is almost of the same pattern as his agreement with the Vijaya Productions Ltd. THE difference between these two agreements is that while the additional remuneration payable by B. N. K. Press Ltd. on the percentage basis is mentioned in the agreement itself, there is no mention of such remuneration in the agreement with the Vijaya Productions. THE additional remuneration of the assessee in respect of his work for the Vijaya Productions came to be fixed by a subsequent resolution of the board of directors, approved and ratified by the general body of the shareholders. So far as the powers and duties are concerned, both the agreements vested the assessee with all such powers as may be necessary to carry on the respective business of the two companies and as are incidental for the day-to-day administration of their affairs.