E. D. SASSOON AND COMPANY LTD. versus THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY

Citation: [1955] 1 S.C.R. 313 · Decided: 14-05-1954 · Supreme Court of India · Bench: SUDHI RANJAN DAS · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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S.C.R. 
SUPREME COURT REPORTS 
313 
1954 
meaningless writs we must dismiss this appeal and 
leave the appellant 
con~ent with an enunciation of the 
law. But as he has m reality won his case and is 
prevented from reaping the full fruits of his victory 
because of circumstances for which he is not respon-
sible, we direct that the first respondent, the State of 
Mysore, and the fourth respondent, Thim_mappa, pay 
the appellant his costs . here and in the High Court. 
The other respondents will bear their own costs . 
K. N. Guruswamy 
v. 
The Stat• of 
Mysor1 and Others. 
• 
Appeal dismissed. 
E. D. SASSOON AND COMPANY LTD. 
v. 
THE COMMISSIONER OF INCOME-TAX, 
BOMBAY CITY. 
(With connected Appeals) 
[S. R. DAs, BHAGWATI and ]AGANNADHADAs JJ.) 
Indian Income-tax Act (XI of 1922), s. 4(1)(a)(b)-"lncome," 
~'accrues", "arises", 
11 is received" -Meaning of-" Earned" -Mean-
in g of-s. 10(1)-"Carried on by him"-Connotation of-Managing 
Agency Agreement-Transfer of rights 
thereunder-Apportionment 
between assignors and assignees. 
The Sassoons had entered into three Managing Agency agree-
ments as the Managing Agents of three different companies. They 
transferred their Managing Agencies to three other companies by 
formal deeds of assignment and transfer on several dates during 
the accounting year. 
The question for determination was whether 
in the circum-
stances of the case the Managing Agency commission was liable to be 
apportioned between the Sassoons and their 
respective 
transferees 
in the proportion of the services rendered as Managing Agents by 
each of them for the respective portions of the accounting year and 
the decision turned upon the question whether any income had 
accrued to the Sassoons for the purpose of income-tax on the dates 
of the respective transfers of the Managing Agencies to the trans-
ferees. Under clause 2(d) of the Managing Agency agreements, the 
commission to the Sassoons as Managing Agents was to be due to 
them yearly on the 31st of March in each and every year and was 
to be payable immediately after the annual accounts of the com-
pany had been passed by the shareholders. 
Held per S. R. DAs and 
BHAGWATI JJ. 
(JAGANNADHADAS J. 
dissenting).-answering the 
question in the negative, that on, the 
Bose]. 
1954 
E. D. Sassoon anti 
Company Ltd. 
v. 
The Commissioner 
of /neome.·tax, 
Bombts.J c;vi. 
314 
SUPREME COURT REPORTS 
[1955] 
construction of the Managing Agency agreements, the contract 
of 
service between the companies and the Managing Agents was 
entire and indivisible, that the remuneration or commission became 
due by the companies to the Managing Agents only on the com-
pletion of a definite period of service 
and at stated intervals, that 
it was a condition precedent to the recovery of any wages or salary 
in respect thereof that the service or duty should be completely 
performed, that such debt constituted a debt only at the 
end of 
each ·period of Service and that no remuneration or commission 
was payable to the Managing Agents for broken periods. 
The Sassoons had not earned any income for lh.e broke~ periods 
nor had any 
income 
accrued to them in respect of the same 
and what they transferred to the transferees 
under the respective 
deeds of assignment and transfer did not include any income which 
they had earned or had accrued to them during the chargeable 
accounting period and which the 
transferees 
by virtue of the 
assignment in their favour \Vere in a position to collect. 
_ 
The true test under section 4(!)(a) of the Indian Income-tax 
Act, for the purpose of ascertaining liability for income-tax in the 
case of transfer of Managing Agency is not whether the transfer-
ors and the transferees had worked for any particular periods 
of 
the 
year 
but whether any income had accrued to the transferors 
and the transferees within the chargeable accounting period. 
The word "profit" in section 4 of the Indian Income-tax Act 
has a well-defined legal meaning. The term impiies a comparison 
between the state of business at two specific dates usually separat-
ed by an interval of a year. The fundamental meaning is the 
amount of gain made by the business during the year. 
"Income" connotes a periodical monetary 
return "coming ·in" 
with some sort of regularity, or expected regularity from definite 
sources. 
The source is not necessarily expected to be continuously 
productive but its object is the production of a definite return ex-
cluding anything

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