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Interpretation of managing agency commission income for taxation purposes. Analysis: The case involves a dispute regarding the taxability of a managing agency commission earned by a firm constituted of 20 partners. The firm was appointed as managing agents of a company under an agreement entitling them to specific commissions. A resolution passed by the company allowed the directors to fix lesser remuneration for the managing agents for specific years. Subsequently, an agreement was made to vary the managing agency agreement, reducing the commission payable to the firm. The issue at hand is whether the reduced commission amount should be considered as the firm's income for taxation purposes or the original higher amount. The Court held that the crucial factor in determining the firm's income was the actual commission received, not the amount that could have been earned under the original agreement. The firm's right to commission was no longer based on the initial agreement after the resolution and subsequent agreement, but was contingent on the directors' decision considering the company's performance. Therefore, the firm's income for taxation was the reduced commission amount decided by the board of directors, not the higher amount specified in the original agreement. The Court emphasized that the firm's right to claim commission was altered by the resolution and subsequent agreement, making the reduced commission the actual income earned by the firm during the relevant year. The Court rejected the argument that the firm should be taxed on the basis of the commission specified in the original agreement, highlighting that the firm's entitlement to commission was modified by the resolution and subsequent agreement. The Court clarified that the firm's income should be based on the actual commission received as per the decision of the directors, rather than a hypothetical higher amount under the original agreement. Therefore, the Court answered the question of law in the negative, stating that the firm's income for taxation purposes was the reduced commission amount actually received, not the higher amount specified in the original agreement. The Commissioner was directed to pay the costs, and the reference was answered in the negative.
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