COMMISSIONER OF INCOME TAX Vs. COTTON AGENTS LIMITED

JUDGEMENT

(1.) MESSRS . Shivnarayan Surajmal Nemani were the managing agents of the New Swadeshi Mills of Ahmedabad Ltd. Prior to 1945. On the 4th January, 1945, the managed company passed a resolution approving the transfer of the managing agency to the assessees. Under the agreement arrived at the assessees became entitled to the managing agency commission from the 1st April, 1944. The managing agency commission from the 1st April, 1944, to the 31st December, 1944, amounted to Rs. 2,20,433 and the managing agency commission from 1st January, 1945, to 31st March, 1945, amounted to Rs. 67,959. The year of account of the assessees was 18th October, 1944, to 4th November, 1945, and the contention of the assessees was that for the assessment year 1946 -47 they were liable to pay tax only on the commission of Rs. 67,959 which they had earned by working as managing agents of the managed company and they were not liable to pay tax on the sum of Rs. 2,20,433. This contention of the assessee was not accepted by the Taxing Department. The Tribunal decided in favour of the assessees and the Commissioner has now come before us on this reference.

(2.) THE managing agency agreement provides : 'The remuneration of the agents as such agents of the company as aforesaid shall be as follows : A commission at the rate of three and a half per cent. on the gross proceeds of all sales of the yarn, cloth, waste and other articles manufactured by the company earned in any year or other period for which the accounts of the company are made up and laid before the general meeting.'

(3.) THE contention of the assessee is that inasmuch as the commission is payable on sale proceeds, the commission accrued to Messrs. Shivnarayan Surajmal Nemani for the period during which they were the managing agents up to the 31st December, 1944, and that the commission only accrued to the assessees after they were appointed managing agents on the 1st January, 1945, and they are liable to pay tax only for the period 1st January, 1945, to 31st March, 1945. The Advocate -General on behalf of the Commissioner has relied on the recent decision of the Supreme Court of the Commissioner has relied on the recent decision of the Supreme Court reported in E. D. Sassoon and Co. Ltd., and Others v. Commissioner of Income -tax, Bombay City, and the whole debate before us has centered round the question as to whether this decision of the Supreme Court applies to the facts of this case or whether this decision is distinguishable.