1964 (12) TMI 2 - HC - Income Tax

Held that office allowance receivable by the company from the managed companies was income of the company for the year 1954-55 even though it was surrendered by a resolution passed before the end of the accounting period

Summary

Issues:
- Whether the office allowance receivable by the company from managed companies was income for the year 1954-55 despite being surrendered before the end of the accounting period?
- Whether managing agency commission and office allowance received by the company from a specific company constituted income for the assessment year 1954-55 even though surrendered after the accounting period?

Analysis:
The case involved questions of law under section 66(1) of the Income-tax Act 1922. The assessee, a private limited company managing other companies and engaging in mineral business, had surrendered its rights to receive office allowance and managing agency commission from various companies. The Income-tax Officer included the surrendered amount in the assessee's total income. The Appellate Tribunal partially allowed the appeal, granting deduction for managing agency commission but upholding the inclusion of the surrendered amount in the total income.

The counsel for the assessee challenged the decision, arguing that the surrendered office allowance should not be included in the total income based on the principles established in a Supreme Court case. The counsel contended that the office allowance had not accrued or been received by the assessee due to the resolution relinquishing the rights within the accounting year. However, the court rejected this argument, stating that the office allowance had accrued monthly and the relinquishment did not entitle the assessee to claim deduction except for the last month.

Regarding the managing agency commission and office allowance from a specific company, the counsel argued for their exclusion from total income as they were surrendered after the accounting period without any prior indication. The court applied principles from previous Supreme Court cases and held that the amount had accrued within the previous year and was rightly included in the total income. The court's interpretation of the agreement clauses supported this decision, leading to the exclusion of the surrendered amount from the total income for the other companies but inclusion for the specific company.

In conclusion, the court answered the questions of law by excluding the last month's office allowance from certain companies but including the specific company's surrendered amount in the total income. The judgment was agreed upon by both judges, with each party bearing their costs.