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TMI Blog1968 (10) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... , on the facts and in the circumstances of the case, the sum of Rs. 25,000 was assessable in the hands of the assessee as its income ? 2. If the answer to question No. 1 is in the affirmative, whether the said sum is an allowable deduction from the assessee's income assessable under section 10? " These two questions have arisen under the following circumstances: The assessee, Messrs. H. G. Gupta & Sons, Delhi, is a registered firm deriving income from managing agency and financing business. The assessment year under reference is 1954-55 and the corresponding previous year is the year ending on March 31, 1954. The assessee-firm was appointed as managing agent to Messrs. H. G. Gupta & Sons Ltd., under an agreement, dated January 6, 1948. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a minimum commission of Rs. 25,000 from the managed company, that the assessee firm had earned the commission, and that if the assessee firm chose not to claim the minimum commission of Rs. 25,000 from the managed company, it only meant a voluntary surrender of the amount by the assessee firm for extra-commercial consideration. He, accordingly, included the sum of Rs. 25,000 in the total income of the assessee firm. Against the said assessment order of the Income-tax Officer, the assessee firm preferred an appeal to the Appellate Assistant Commissioner, and contended that, on a correct interpretation of clause 2(b) of the managing agency agreement, the assessee firm was entitled to a minimum commission of Rs. 25,000 only when the profit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner, the assesee firm preferred a second appeal to the Income-tax Appellate Tribunal, Delhi Bench " B ". The aforesaid two contentions were again urged before the Tribunal. But, the Tribunal rejected the said contentions and dismissed the appeal by its order, dated March 31, 1963, holding that, under clause 2(b) of the agreement, the assessee firm was entitled to Rs. 25,000 as commission and that there was no actual waiver in respect of the sum of Rs. 25,000 by the assessee firm, and, therefore, there could not be any question of the said sum being allowed as a deductible expenditure under section 10(2)(xv) of the Income-tax Act, irrespective of the fact whether it was on grounds of commercial expediency or otherwise. Therefore, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging agent (assessee firm), i.e., the assessee firm was entitled to a minimum commission of Rs. 25,000 only if the profit of the managed company had exceeded Rs. 25,000, that since the profit of the managed company was only Rs. 5,571 before charging the commission of the managing agent, no commission way payable to the assessee firm, and that, therefore, no commission had accrued to the assessee firm and was, in fact, paid to the assessee firm. On the other hand, Shri A. N. Kirpal, the learned counsel for the Commissioner of Income-tax, contended that the words " minimum profit " used in clause 2(b) of the agreement meant that, under clause 2(b) of the agreement, the assessee firm was entitled to a minimum commission of Rs. 25,000 and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Rs. 25,000, but it will not get any amount of commission if the profit of the managed company is a rupee or two less than Rs. 25,000. In the above view, it follows that the assessee firm was entitled to a minimum commission of Rs. 25,000 towards remuneration, and that the said amount had accrued to the assessee firm in the accounting year in question. Our answer to the first question referred to is that the sum of Rs. 25,000 was assessable in the hands of the assessee firm as its income. The second question referred to us relates to the contention of the assessee that the sum of Rs. 25,000 should be allowed as deductible expenditure under section 10(2)(xv) of the Act. This question would arise only if there was a conscious waiver of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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