R. G. S. NAIDU AND CO. versus COMMISSIONER OF INCOME-TAX AND EXCESS PROFITS TAX, MADRAS

Citation: [1961] 3 S.C.R. 271 · Decided: 14-12-1960 · Supreme Court of India · Bench: J.L. KAPUR · Disposal: Dismissed

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Judgment (excerpt)

3 S.C.R. SUPREME COURT REPORTS 
271 
there was no agreement of sale of goods to be obtain-
ed in future between the assessee and the third 
party". 
In the result, the appeals fail, and are dismissed 
with costs. One hearing fee. 
Appeals.dismissed. 
R. G. S. NAIDU AND CO. 
v. 
COMMISSIONER OF INCOME-TAX AND 
EXCESS PROFITS TAX, MADRAS 
(And connected appeals) 
(J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, JJ.) 
Excess Profits Tax-Excess profits, unassessed or u11derassessed 
-Assessment, if can be reopened-Apportionment of income-Excess 
Profits Tax Act, z940 (XV of z940), s. z5, r. 9, Sch. I. 
Under an agreement dated July II, 1945, the appellants 
were appointed managing agents of the Coimbatore Spinning and 
Weaving Co. Ltd., for 20 years, and certain remuneration was 
provided for them including 10% commission on the net profits 
of the company due and payable yearly immediattily after the 
accounts of the company were closed and commissions on pur-
chases and capital expenditure of the company. Prior to Octo-
ber l, 1944• the appellants were the managing agents of the 
Coimbatore Mills Agency Ltd., who were the managing agents of 
the Coimbatore Spinning and Weaving Co. Lt<;!. 
The year of 
account of the appellants ended on March 31, of the company on 
June 30, and of the Agency Company on September 30. For the 
assessment year 1945-46 the appellants submitted a return of 
their income which included the stipulated remuneration and 
commissions. This return was accepted by the Income-tax Offi-
cer, and Excess Profits Tax liability for the chargeable account-
ing period ending March 31, 1945. was also worked out on that 
basis. A return of income was submitted by the ap)lellants for 
the assessment year 1946-47 which included commission for the 
period 1-4-45 to 3o-6-45 on purchases of cotton and stores and on 
capital expenditure. The Tax Officer directed that the commis-
1ion on purchases and capital expenditure be taken into account 
Bayyana 
Bhimayya 
v. 
The Government 
of Andhra Pradesh 
Hidayatullah ]. 
Deeember I 4. 
272 
SUPREME COURT REPORTS 
[1961) 
1960 
for the year April I, 1945, to. March 31, 1946, and that the re-
ceipts be computed accordingly. The assessment for 1945-46 was 
R. G. s. Naidu then reopened under s. 34 of the Income·tax Act under s. r5 of 
& Co. 
the Excess Profits Tax Act and as a result of apportionment 
v. 
made by the application of r. g of Sch. I of the Excess Profits 
Commissioner of Tax Act, the liability of the appellants for Income-tax and Ex-
lncome-tax and cess Profits Tax was revised and fresh assessments \Vere made. 
Excess Profits tax, The orders of assessment were confirmed by the appellate autho-
M adras 
ties. 
Shah ]. 
Held, that as in the instant case the chargeable accounting 
period for the assessment of Excess Profits Tax and the year of 
account of the company did not tally, by the assessment of in-
come made on the assumption that they did tally, there had 
resulted underassessment and it was open to the Tax Officer 
to take action under s. 15 of the Excess Profits Tax Act. The 
Excess Profits Tax Officer acted properly in apportioning under 
r. 9 of Sch. I the commission received by the appellants. 
Rule 9 of Sch. I of the Excess Profits Tax Act is enacted in 
general terms and it is applicable to all contracts which are in .. 
tended to be operative for fixed periods. If, for the performance 
of th'3 entire contract, remuneration is payable at certain rates 
the profits earned out of that remuneration must be apportioned 
in the manner prescribed by r. 9 if the performance of the con-
ract extends beyond the accounting period. 
E. D. Sassoon & Co., Ltd. v. The Commissioner of Income-tax, 
Bombay City, [1955] 1 S.C.R. 313, distinguished. 
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 
181 to 184 of 1960. 
Appeals from the judgment and order dated March 
16, 1955, of the Madras High Court in Case Referred 
No. 43 of 1950. 
A. V. Viswanatha s~tri, R. Ganapathy Iyer and 
G. Gopalakrishnan, for the appellants. 
Hardayal Hardy and D. Gupta, for the respondent. 
19110, December 14. The Judgment of the Court 
was delivered by 
SHAH, J.-These appeals relate to Excess Profits 
Tax liability of the appellants in respect of two 
chargeable accounting periods April l, 1944, to 
March 31, 1945, and April 1, 1945, to March 31, 1946. 
The appellants were under an agreement dated 
July 11, 1945, appointed managing agents for 20 
years of the Coimbatore Spinning and Wea

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