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TMI Blog1980 (10) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as managing agents of South Madras Electricity Supply Corporation Ltd. for a period of five years commencing from 1st April, 1960 under the agreement dt. 5th Dec., 1959. It was renewed from time to time and by agreement dt. 2nd March, 1965 assessee was reappointed as managing agents of the said company for a period of five years commencing from 1st April, 1965 or till the State Government of Madras nationalised the electricity industry, whichever was shorter. Under the said agreement the assessee was entitled to remuneration of 10 per cent of net profits subject to a maximum of Rs. 12,000. 4. The assessee was also appointed managing agent of M/s Seshasayee Brothers (Private) Ltd. for a period of 15 years from 6th March, 1948 under the agreement of even date. Under the said agreement assessee was entitled to remuneration of 10 per cent of net profits of the company subject to a minimum of Rs. 12,000 per year, in the absence of or inadequacy of profits which however, shall be increased to Rs. 18,000 per year, if any when the paid up capital of the company exceed Rs. 20 lakhs. 5. The institution of managing agency was abolished by the amendment made to the Companies Act of 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, aggregating to Rs. 4,82,739. 9. For the asst. yr.1970-71 assessee had offered only the amount of remuneration which it had actually received from the above mentioned two companies. Rs. 2,53,214 and Rs. 2,32,125 referred to above were not included in the return filed by the assessee for that assessment year. The contention of the assessee was that such amounts accrued to the assessee only on 10th Aug., 1970 and 5th Sept., 1970, the days on which the general body of the two companies approved the accounts of the companies. The ITO did not accept the above contention. In the assessment made for the asst. yr. 1970-71 he included the aforesaid two amounts also. He also included Rs. 60,000 being the compensation received by the assessee from the Rajapalayam Company for the termination of its services as consultants. That was confirmed on appeal by the AAC. Thereupon the assessee preferred ITA No. 155 (Mds)/77-78 to the Tribunal reiterating the contention that the balance of managing agency remuneration of Rs. 2,53,214 and Rs. 2,32,125 received from M/s South Madras Electricity Supply Corporation and M/s Mettur Chemicals Industrial Corporation Ltd. accrued only on 10th Aug., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is that Rs. 60,000 received from the Rajapalayam Company could not be treated as income since it was receipt of capital nature and could not be taxed. 13. The contention taken by the Department in its appeal is that the AAC was not justified in deleting outright Rs. 5,42,739 on the ground that he had held that the same was assessable for the asst. yr. 1970-71 since the Department had not accepted the same and since it had not become final. 14. So far as the taxability or otherwise of Rs. 60,000 received by the assessee form the Rajapalayam Company is concerned, it is to be seen that the Tribunal by its order dt. 24th March, 1980 in ITA No. 155 (Mds)/1977-78 relating to the asst. yr. 1970-71 has categorically held that it was a receipt of capital nature and was not taxable even under s. 28(2)(c) of the IT Act, 1961. In view of the above finding, we hold that Rs. 60,000 cannot be included in the assessment for the assessment year under consideration. 15. The next question is as to whether Rs. 2,53,214 received by the assessee from the South Madras Electricity Supply Corporation Ltd. and Rs. 2,32,125 received from Mettur Chemical and Industrial Corporation could be brought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Deptl. Rep., on the other hand, urged that since the amounts received by the assessee from the two companies were not of capital nature but of Revenue nature being remuneration paid for services already rendered as managing agents and since such amounts had accrued to the assessee during the relevant previous year, the same was liable to be taxed. He pointed out that the contention now put forth was not raised by the assessee when these amounts were sought to be included in the assessment made for the asst. yr. 1970-71 and that the AAC has not considered the question as to whether the assessee had ceased to carry on business during the relevant assessment year. He further pointed out that admittedly the assessee had commenced a new business in elector medical equipment during the year ending 1st March, 1972 and continues to carry on the same. According to him, the assessee could not be said to have given up the intention of carrying on business and therefore, even if the assessee had not carried on any business during the relevant previous year ending 31st March, 1971, the amounts received by the assessee from the two companies referred to above were liable to be taxed. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, find it difficult to accept the contention of the assessee that it had not carried on business during the relevant previous year and, therefore, the balance of managing agency remuneration received by it from the two companies is not liable to be taxed in its hands for the assessment year under consideration. 18. The contention that because the managing agencies were terminated, the amount received for services rendered earlier cannot be taxed for the asst. yr. 1971-72 is also devoid of merit. The facts in Nalinikant Ambalal Mody vs. S.A.L. Narayan Row, CIT are entirely different. There, the assessee, who was an advocate, had adopted the calendar year as the accounting year and had kept his accounts on the cash basis, was appointed as Judge of the Bombay High Court w.e.f. 1st March, 1957. By reason of such appointment he could not have carried on the profession. He received in the years 1958 and 1959 certain monies on account of fees outstanding for professional work done by him prior to his appointment as Judge of the Bombay High Court. The question for consideration was whether the amount could be brought to tax in the respective assessment years. The question was answered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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