PEREIRA AND ROCHE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS matter relates to the assessment year 1960-61. The assessee was a registered firm and was the managing agent of Heavy Chemicals Limited, a public limited company. Under the provisions of the articles of association, the assessee was entitled to remuneration consisting of an office allowance of Rs. 1,000 per month from the date of the incorporation of the company and commission of the ten per cent. on the net annual profits with a minimum payment in the absence or inadequacy of profits of Rs. 1,500 per month from the date of commencement of the business by the company. On June 15, 1953, the assessee wrote to the company confirming the resolution of the letter nominating Chevalier J.L.P. Roche Victoria as its ex-officio director on behalf of the managing agents and intimating that thereby they authorised Roche Victoria to draw the managing agency allowance of Rs. 1,000 per month for his expenses to attend to all the matters relating to the managing agency affairs on behalf of the assessee. During the accounting year ended on June 30, 1959, the assessee credited the sum of Rs. 12,000 in its books as managing agency commission from the company and debited Roche Victoria with that amount. In the circumstances, the assessee did not include the sum of Rs. 12,000 in its total income in the return. The Income-tax Officer added this sum declining to accept the assessees claim that the sum should not be regarded as an income or in any case should be viewed as an expenditure entitled to deduction under section 10(2)(xv). The Appellate Assistant Commissioner however accepted the assessees appeal. The revenue made a successful appeal to the Tribunal which expressed its view that the receipt was by the assessee-firm primarily and the payment Roche Victoria was only an application of that income. In its application under section 66(1) the assessee specifically wanted the Tribunal to refer to this court the question covering the claim for deduction. In the statement of the case the Tribunal has stated that it did not overlook, as wrongly assumed by the assessee, the contentions that the assessee would be entitled to deduction of the sum under section 10(2)(xv). But actually in the order of the Tribunal it does not appear that the Tribunal expressed any view on that question if it formed any in its mind. But it is clear from the statement of the case that the question was raised before the Tribunal.

(2.) IN the above circumstances, learned counsel for the assessee contended that if this court took the view that the sum of Rs. 12,000 constituted income in the hands of the assessee, this court should reframe the question in such a way as to include the tenability of the assessees claim to deduction under section 10(2)(xv). We think that learned counsel is right on that aspect. But, before we consider it, we shall first see whether the sum could be regarded as income in the hands of the assessee.