The Commissioner Of Income-tax,bombay North & Others. VS. M/s. Harivallabhdas Kalidas And Co.,

Reporting JudgeKapur

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Summary

The respondent-firm Harivallabhdas Kalidas was appointed the Managing Agent of Shri Ambika Mills Ltd., the appellant in the connected appeal by means of a Managing Agency Agreement the relevant portion of which ran thus:- (2)(a) The Company shall pay each year to the said Firm either the commission of 5 (five) per cent on the total sale proceeds of yarn, and of all cloth, manufactured from cotton, 51

silk, jute, wool, waste and other fibres and sold by the company, or a commission of three pies per pound avoirdupois on the sale, whichever the said Firm choose to take, and also a commission of 10 (ten) per cent on the proceeds of sale of all other materials sold by the Company and 10 (ten) per cent on the bills of any ginning and pressing factories and on any other work done by the Company."

And by clause (5) it was provided: " (5) The remuneration payable to the said Firm under clause 2(a) shall be paid to the said Firm forthwith after the 31st day of December or such other date as the Directors may fix for the closing of the accounts of the Company in each year and after such accounts are passed by the company in General Meeting."

Subsequently, at the request of the Managed Company the Managing Agents agreed to charge commission at 3 per cent on sales instead Of 5 per cent for the year ending December 31, 1950 and a resolution to that effect was passed by the Managed Company and a formal agreement to that effect was executed. The income-tax Authorities, however, taxed the Managing Agents for two assessment years on the basis that by entering into an agreement with the mills they had voluntarily relinquished certain sums of money as their commission which had accrued to them as income for the purpose of income-tax. An appeal was taken to the Income- tax Tribunal which held that the agreement between the Managing Agent and the Managed Company to receive remuneration at 3 per cent on the total sale was valid and took effect from January, 1, 1950 and the questions whether the commission accrued on the proceeds of every single sale or only when the assessee firm exercised its option to charge it on the total sale proceeds or on the weight of the yarn sold and whether the Managing Agents would get their commission after the whole profit was determined at the end of the year, were decided in favour of the Managing Agents.

The High Court also on a reference made to it at the instance of the Commissioner of Income-tax, answered the above mentioned question in favour of the Managing Agents.

On appeal by the Incomee-tax Commissioner by special leave, Held, that on a proper construction of the agreement, it was clear that there was no accrual of commission till the end of the year and that it did not accrue as and when the sales took place. The Managing Agents were to be paid at the end of the year and by agreeing to the modification of the agreement before then they had not voluntarily relinquished any portion of the commission.

Commissioner of Income-tax, Madras, v. K.R.M.T.T. Thiagaraja Chetty and Co., [1954] S.C.R. 258, E.D. Sasoon and Co. Ltd. v. The Commissioner of Income-tax Bombay City, [1955] i S.C.R. 313 and Commissioner of Inland Revenue v. Gardner Mountain and D' Ambrumenil Ltd., 29 T.C. 69, not applicable.

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Extract

The Commissioner Of Income-tax,bombay North & Others. VS. M/s. Harivallabhdas Kalidas And Co.,

PETITIONER: THE COMMISSIONER OF INCOME-TAX,BOMBAY NORTH & OTHERS.

Vs.

RESPONDENT: M/S. HARIVALLABHDAS KALIDAS AND CO.,

DATE OF JUDGMENT: 19/02/1960

BENCH: KAPUR, J.L.

DAS, S.K.

HIDAYATULLAH, M.

CITATION: 1960 AIR 703 1960 SCR (3) 50

CITATOR INFO : R 1960 SC1336 (3)

MV 1986 SC 757 (15)

ACT: Incometax-Managing Agent's Commission payable at the end of the year-Rate of Commission reduced before then by agree- ment-If voluntary relinquishment of a Portion of accrued commission.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 145/58 and 323/57.

Appeals by special leave from the judgment and order dated September 14, 1955, of the Bombay High Cou...

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