COMMISSIONER OF INCOME-TAX Vs. MOTIRAM NANDRAM

JUDGEMENT

(1.) IN this case the respondents have not been represented before their Lordships.

(2.) THE appeal is brought by the Commissioner of Income-tax, Central and United Provinces, Lucknow, from a decision of the High Court at Nagpur given upon a reference made to that Court under Section 66 (2) of the Indian Income-tax Act, 1922. THE question of law is as to the admissibility of a deduction of Rs. 39,500 in computing the profits of the assessees' business. THE year of assessment in respect of which the question arises is the year 1933-4, and as it is not contested that the sum in question was expended or lost in the " previous year," 1932-3, the deduction, if permissible, is claimed for the proper year.

(3.) THE agreement refers to the Bombay firm as " the company " and to the assessees as " the organising agents. " It recites that the assessees were carrying on business as cloth merchants ; that they had requested the company to appoint them organising agents in a defined territory known as Eastern Central Provinces ; and that they had offered to deposit with the company Rs. 50,000. THE company by the agreement appointed the assessees to be organising agents for five years in respect of the territory specified. Clause 4 recited that in consideration of such appointment the assessees had on December 8 and 12, 1930, deposited Rs. 3,000 and Rs. 22,000-in all Rsi. 25,000. It provided that on or before January 17, 1931, they should deposit a further Rs. 25,000. "the said sum of Rs. 50,000 shall remain at the disposal of the company for the purposes of the company's business and shall carry interest at the rate of 7 per cent, per annum until the deposit is returned by the company to the organising agents out of the selling agents' deposits as hereinafter provided. "