1969 (9) TMI 8 - HC - Income Tax

Summary

Issues:
1. Entitlement to deduction of managing agency remuneration.
2. Treatment of sum forgone by managing agent as a revenue receipt.

Entitlement to Deduction of Managing Agency Remuneration:
The case involved a reference under section 66 of the Indian Income-tax Act, 1922, concerning the entitlement of an assessee-company to a deduction of Rs. 55,359 as managing agency remuneration. The managing agent had initially agreed to receive this amount as commission but later waived it. The Income-tax Officer, Appellate Assistant Commissioner, and Appellate Tribunal all denied the deduction. The Tribunal rightly held that what is included in another assessee's assessment is irrelevant to the present case. The assessee did not pay the commission during the relevant accounting period, and the waiver by the managing agent did not change the fact that no actual expenditure was incurred by the assessee. Citing legal precedents, the court emphasized that where income is given up after it has accrued, the tax liability may still exist if the income was received. However, in this case, as no expenditure was actually incurred by the assessee, the deduction was rightly disallowed.

Treatment of Sum Forgone by Managing Agent as a Revenue Receipt:
The second question referred to whether the sum forgone by the managing agent should be treated as a revenue receipt. However, this question did not arise in previous proceedings and was not raised by the assessee at any stage. As it did not form part of the Tribunal's order, the court deemed it unnecessary to address this question. Consequently, the court answered the first question in the negative, against the assessee, and declined to answer the second question. The assessee was directed to pay costs of the reference to the Commissioner of Income-tax.

In conclusion, the court held that the assessee was not entitled to a deduction for the managing agency remuneration due to the lack of actual expenditure incurred by the assessee. The issue of the sum forgone as a revenue receipt was not addressed due to its non-consideration in previous proceedings.