QAMAR SHAFFI TYABJI versus THE COI\LI\JLSSLONER, EXCESS PROFITS TAX, HYDERABAD

Citation: [1960] 3 S.C.R. 546 · Decided: 18-04-1960 · Supreme Court of India · Bench: S.K. DAS · Disposal: Dismissed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

196U 
J-Ialisi11gh .1.\lfg. 
Co. Lid. 
v. 
Union of India 
196U 
April 18. 
546 
SUPRE.\1E COURT REPORTS 
[1960] 
ln our view, the impugned s. ~.'iFFF(I) indudiug 
the proviso and the explanation thereto are not 1111-
constillltional as infringing· the freedom guaranteed by 
Art. 19(l)(g) of the Constitution or as infringing Arts. 14 
or 20 of the Constitution. On that. view, the petitions 
fail and are dismissed "·ith costs. 
There will univ be 
one hearing fee. 
' 
Pe!.ilions dis111issed.. 
QAMAR SHAFFI TYABJI 
v. 
THE COi\li\JlSSlONER, EXCESS PROFITS TAX, 
HYDERABAD 
(S. K. DAs, J. L. KAPCR and 1\I. 1-lmAYATCLLMI, Jj.) 
Excess Profits Tax-Managing Agency and Selling Agency 
agreements-Construction-Delegation of Agency-Delegate, whe-
ther agent or employee-Remuneration and commission derived by 
such delegate-Liability to tax-Indian Contract Act, 1872 (9 of 
1872), s. 194. 
By an order of the Ruler of the erstwhile State of Hyderabad 
an institution was formed for the development of industries on 
behalf of the Government, called the Industrial Trust Fund, to 
be managed by a committee called Trustees. 
In 1934 the Trustees 
entered into agreements with two cotton mills situated in the 
State by virtue of which they were appointed secretaries, trea-
surers and agents of the said mills. 
They were gi ,·en the general 
inanagement of the mills including the power to appoint emp-
loyees and were also appointed selling agents of the mills. 
By sepa-
rate agreements the 
Trustees were -given power to delegate to 
other persons all or any 
of the powers 
under the agreements 
subject to the approval of the Board of Directors of the respective 
mills. 
On December 6, 1938, the Truste~s entered into an agree-
ment with the appellant whereby they delegated their powers in 
his favour and appointed him as the managing agent of their 
business as secretaries, 
treasurers and 
agents, 
as also 
selling 
agent of the two mills, subject to their general control. 
The appel-
lant was to hold the office of managing agent and selling agent 
for the remaining period of the original' managing agency and. 
selling agency agreements. 
The remuneration of the appellant for 
the managing agency was fixed at Rs. 2,000 per month and a 
commission of 21 per cent. out of the commission of 121- per cent. 
per annum on the annual profits payable to the 
Trustees. 
For 
the selling agency a separate commission was payable on the sale 
of different kinds of goods. 
Clause 9 of the agreement provided 
. . 
·: 
-· 
... -
) 
3 S.C.R. 
SUPREME COURT REPORTS 
547 . 
that the managing agent shall not assign the benefit of the agree-
J961J 
ment, the same being 
personal to himself. 
For the 
accounting 
--
.. 
years 1941-42 and 1942-43 _the appe.llant was assessed to 
eXC~ss Q_am.n Sh1'jfi TyabJt 
profits tax, but he contended that the Trustees of the Industnal 
Commissi~ner, 
Trust Fund were the managing agents as also the selling agents Excess Profits Tnx, 
of the two mills, that the Trustees employed him on certain terms 
l{_rderabad 
and gave him certain powers, and that he was not carrying on an 
independent business of his own but was just carrying out the 
duties of an employee 
of the Trustees. 
He claimed that his 
.remuneration under the agreement dated December 6, 1938, was 
merely salary and not income derived 
from business and there-
fore not liable to excess profits tax: 
Held, (1) that under the agreements of 1934 the Trustees as 
agents had express authority to name the appellant to act for the 
principal in the business of agency and that therefore the appel-
lant was neither a servant nor a mere sub-agent, but an agent of 
the principal for such 
part of the business 
of agency as was 
entrusted to him, within the meaning of s. 194 of th.: Indian Con-
tract Act, 1872 . 
(2) that on the true 
construction of the 
agreement dated 
December 6, 1938, the appellant was undertaking 
a business of 
his own in accepting the duties and responsibilities of a managing 
agent of the two mills under the general control of the Trustees, 
and that, therefore, the income derived by him as remuneration 
and commission was liable to excess profits tax. 
Lakshminarayan Ram Gopal and Son Ltd. v. The Government 
of Hyderabad, [19551 1 S.C.R. 393 and J. K. Trust, Bombay v. The 
Commissioner of Income-tax/ Exce.s Profits Tax, Bombay, [1958] 
S.C.R. 65, relied on. 
C1v1L 
APPELLATE 
JllRJSDJCT!ON: 
Civil Appeals 
Nos. 824 and 825 of 19.57. 
Appeals by spec

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