1965 (9) TMI 2 - HC - Income Tax

Managing agency commission - latter question is entirely different from the former - tribuanl dismissed assessee sapplication stating categorically that this point was never argued before it and that consequently it was not referred to in its order - held that If the assessee wanted the other question to be formulated its remedy was to move this court under section 66(2) for mandamus requiring the Tribunal to formulate it but it has not done so and the period of limitation for its doing so has expired.

Summary

Issues:
Interpretation of Section 12-A of the Indian Income-tax Act for managing agent income assessment.
Applicability of Section 10(2)(xv) for deduction of money paid to third parties.
Jurisdiction of the High Court to reframe questions referred by the Tribunal under section 66(1).
Assessee's entitlement to benefits under Section 12-A and Section 10(2)(xv).

Analysis:
The judgment pertains to an assessee earning income as a managing agent of two companies and entering into agreements with third parties to share the managing agency commission. The assessee claimed to be liable for assessment on only 7/8th of the income received, with the remaining 1/8th to be assessed in the hands of the third parties under Section 12-A of the Income-tax Act. However, the Income-tax Officer assessed the assessee on the whole managing agency commission, leading to an appeal. The Appellate Assistant Commissioner allowed deduction under Section 10(2)(xv) for money paid to third parties, but the Tribunal restored the Income-tax Officer's order, denying the benefit of Section 10(2)(xv) due to the failure to fulfill Section 12-A conditions.

The Tribunal's decision was based on the premise that a managing agent sharing commission with a third party can only benefit from Section 12-A and cannot rely on Section 10(2)(xv) if the Section 12-A conditions are unmet. The Tribunal did not address whether the money paid to third parties was deductible under Section 10(2)(xv) and upheld the Income-tax Officer's assessment. The assessee sought rectification under section 35, claiming inadequate opportunity to fulfill Section 12-A conditions, but the Tribunal rejected the application as the point was not raised during the proceedings.

Regarding the questions referred to the High Court under section 66(1), the Court found that the questions framed by the Tribunal did not accurately reflect the issues arising from its order. The Court emphasized that it cannot reframe questions to substitute entirely different ones and can only address questions referred by the Tribunal. As a result, the High Court refused to answer the questions posed by the Tribunal, holding the assessee responsible for the proceedings' futility and directing the assessee to pay costs to the Commissioner of Income-tax. The reference was returned unanswered, and the judgment was sent to the Income-tax Appellate Tribunal as required by law.