KANNAPIRAN MILLS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, a limited company, was being managed by a firm, M/s. K. Venkataswamy Naidu & Co., on the strength of an agreement dated July 12, 1946. According to the said agreement, the managing agents were to be paid, as remuneration for their services, 10 per cent. of the net profits of the company. Later, by a further agreement dated December 25, 1958, the remuneration payable to the managing agents was made subject to a minimum of Rs. 25,000 per year. On April 2, 1960, one of the three partners of the managing agency firm died and the managing agency firm ceased to function thereafter. One of the surviving partners, one K. Ramachandran, was functioning as the managing director for the period April 2, 1960, till August 1, 1960, on which date a fresh managing agency agreement was entered into between the assessee-company and K. Venkataswamy Naidu and Co., a newly constituted firm, with the said managing director, K. Ramachandran, and the sons of the deceased partner as partners.

(2.) FOR the period January 1, 1960, to March 31, 1960, the assessee paid a remuneration of Rs. 14,830 to the former managing agency firm as per the agreement dated July 12, 1946, as modified on December 25, 1958. FOR the period September I, 1960, to December 31, 1960, the assessee paid a remuneration of Rs. 19,773 to the new firm, K. Venkataswamy & Co. These two amounts were assessed to tax in the hands of the respective magaging agents.