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Issues Involved:
1. Whether the receipts of the applicant from Laxmi Ratan Cotton Mills Ltd. could be held to be profits from business within the meaning of Section 2(5) of the Excess Profits Tax Act. Issue-Wise Detailed Analysis: 1. Nature of Receipts from Laxmi Ratan Cotton Mills Ltd. The primary issue is whether the sum of Rs. 1,27,147 received by the assessee from Laxmi Ratan Cotton Mills Ltd. should be classified as "profits from business" or "salary" under the Excess Profits Tax Act. The assessee, who acted as a broker for the Mills, claimed this amount as "salary" while the Excess Profits Tax Officer assessed it as "income from business." Facts and Circumstances: - The assessee secured orders for the Mills and advised them on marketable cloth types, receiving 4 annas per cent on sales initially. - In 1941-42, the remuneration was increased to Re. 1 per cent, with 4 annas paid in cash and 12 annas credited for bad debts. - Up to 1944-45, the income was shown as "income from business." - In 1945-46, the assessee claimed the income as "salary," but the Income-tax Officer assessed it under "business." - The Tribunal found that the assessee was an adviser of a commercial nature, finding markets for goods and dealing independently of the company. Tribunal's Inferences: - The assessee was a commercial adviser and guarantee broker, remunerated on a commission basis. - The relationship between the assessee and the Mills was not that of a servant and master but of two independent contracting parties. Legal Tests and Principles: - The distinction between "business" and "employment" is often thin, and the relationship between the parties is crucial. - Various tests include whether the assessee is doing his own work or working for others, the extent of control, entitlement to profits and liability for losses, and whether the work is done for multiple entities or just one. - Relevant cases cited include Robbins v. Commissioners of Inland Revenue and Marsh v. Commissioners of Inland Revenue, which helped delineate the boundaries between independent business and employment. Tribunal's Conclusion: - The Tribunal concluded that the assessee's work was partly as a commercial adviser and partly as a guarantee broker, thus qualifying as "receipts from business." Court's Analysis: - The court examined the definition of "business" under Section 2(5) of the Excess Profits Tax Act, noting its broad scope, including trade, commerce, manufacture, profession, or vocation. - The court considered whether the remuneration could be split into 4 annas per cent and 12 annas per cent. It found that the 12 annas per cent for guaranteeing bad debts could not be considered salary as it involved significant risk and potential loss, characteristic of a business venture. - Even if the commission was treated as a single payment, the nature of the work-advising, securing orders, and bearing risks-indicated it was a business venture. Final Judgment: - The court affirmed the Tribunal's decision, concluding that the receipts were indeed "profits from business" within the meaning of Section 2(5) of the Excess Profits Tax Act. - The answer to the question referred was in the affirmative, supporting the Excess Profits Tax Officer's assessment.
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