9911796707
TMI Blog1981 (12) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany ended on31-12-1977whereas the accounting period of the assessees ended on31-3-1978. The assessee's contention was that the accounts of the company for the year ending on 31-12-1977 were passed at the general body meeting of the said company held on 25-5-1978 and that the net profits of the company were determined only on that date and that as such, the commission payable to the assessees became due only on that date which date fell outside the previous year of the assessees relevant for this year. The assessees were employed as directors in Ranbaxy Laboratories Ltd. and the terms of appointment were : a fixed salary plus 1/2 per cent commission on the net profits of the company. It was not in dispute that the commission receivable by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to the Commissioner (Appeals) the profits had already accrued on31-12-1977and the liability of the company to pay commission to the assessee was embodied in the net profits. He further observed, that it made no difference whatsoever if the actual amount of commission got quantified later and was payable only after such quantification. The Commissioner (Appeals) upheld the action of the ITO and the assessees are in further appeal before us. 6. We have heard the parties. The facts as stated above are not in dispute. The only other relevant fact is that the auditors had completed the audit of the accounts on20-4-1978. The terms of appointment of the assessees with the company provided that besides salary, they shall also be paid 1/2 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auditors. It was only after the audit was over that it could be said that the net profits had been determined or ascertained. In fact many adjustments have to be made in the light of the audit of the auditors. The assessee had submitted that in respect of the income from commission, the accounts were being maintained on receipt or cash basis. Even though the commission was an item included in the terms of appointment of the assessee, it could still have a different treatment depending on the facts of the case. The assessees were directors and they had to show, in respect of the accounts of the company, that they were not rushing through the matters and were not taking away their shares of profit in the shape of commission even before the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto existence only after the accounts had been audited and were certified by the auditors as representing the true state of affairs. We, accordingly, hold that the amounts of commission in the cases of both the assessees would fall to be assessed in the next year on receipt basis as was contended by the assessees. There was no charge of the revenue that the assessees had manoeuvred this position to reduce their tax liability in this year. The amounts had been duly shown by the assessees in the succeeding year on receipt basis. The assessees had also contended that the terms of appointment of the assessees were approved by the Company Law Board in March, 1978, which was after31-12-1977, the end of the accounting period. The two appeals are a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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