LexTHE COMMISSIONER OF INCOME-TAX, BOMBAY NORTH & OTHERS. versus M/S. HARIVALLABHDAS KALIDAS AND CO.,
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I960 Commissionsr of Income-Tax, Bombay v. Chandulal Keshavlal & Co. Kapuy ]. F 6bruary. il9 50 SUPREME COURT REPORTS [1960) not in terms, negativing the Crown's contention. I think that there was ample material to support the findings of the Commissioners, and accordingly that this prohibition does not apply." Thus in cases like the present one in order to justify deduction the sum must be given up 'for reasons of commercial expediency ; it may be voluntary, but so long as it is incurred for the assessee's benefit the deduction would be claimable. The Income-tax Appel.late Tribunal has found in favour of the Managing Agent that the amount was expended for reasons of commercial expediency, it was not given as a bounty but to strengthen the Managed Company and if the financial position of the Managed Company became strong the Managing Agent would benefit thereby. Th>l.t. finding is one of fact. On that finding the Income-tax Appellate Tribunal rightly came to the conclusion that it was a deductible expense under s. 10(2)(xv). In our OJ>inion the judgment of the High Court was right and we would dismiss this appeal with costs . • Appeal dismissed. 1- THE COMMISSIONER OF INCOME-TAX, BOMBAY NORTH & OTHERS. v. M/S. HARIV ALLABHDAS KALIDAS AND CO., (S. K. DAs, J. L. KAPUR AND M. HrnAYATULLAH. JJ.) Income-tax-Managing Agent's Commission payable at the end of the year-Rate of Cm1<missio1~ reduced before then by agree- ment-If voluntary reliiiquishment of a portion of accrued commission. 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, manufactnred tram cotton, - - ..... -- 3 S.C.R. · SUPREME COURT REPORTS 51 silk, jute, wool, waste and other fibres and sold by the i96o company, or 'a commission of three pies per pound avoirdupois Commissioner of on the sale, whichever the said Firm choose to take, and also Income-Tax, a commission of IO (ten) per cent on the proceeds of sale of all B b N th other materials sold by the Company and IO (ten) per cent on om ay or the bills of any ginning and pressing factories and on any M/ H ".· 11 'hd th k d · ti C " s. ariva au as o er wor one oy ie ompany. Kalidas And by clause (5) it was provided: "(5) The remuneration payable to the said Firm under clause z(a) shall be paid to the saii!l Firm forthwith after the 31st day of December or such otker 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, r, :i:950, and the questions whether the eommission accrued on the proceeds of every single sale or only wken 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-fax, answered the abovementioned question in favour of the Managing Agents. On appeal by the Income-tax Commis- sioner 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 tha
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