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TMI Blog1972 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... year?" The assessment year in question is 1951-52 the corresponding financial year ending on 31st March, 1951. The assessee is an individual. Under an agreement dated the 5th July, 1945, executed between the assessee and Messrs. Punjab Distilling Industries Ltd., Khasa, the assessee was appointed this company's managing director and his remuneration was fixed at : (i) commission at the rate of 7 1/2 per cent. of the annual net profit of the company, and (ii) salary of Rs. 5,000 per month. Besides these, he was also entitled to receive bonus as and when it was declared. For the year in question, the commission at the aforesaid rate worked out to Rs. 44,116 and the salary was Rs. 60,000. The assessee would have also been entitled to a sum of Rs. 15,000 as bonus for the year in question. Thus, the three amounts put together came to Rs. 1,19,118. The amount was taxed in the hands of the assessee, although his case before the department was that he had forgone his commission, salary and bonus on account of the company being in financial difficulties. It was contended by the assessee that inasmuch he had forgone these amounts, the same never accrued to him or arose to him and so could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Act. In the case of this assessee, salary, commission and bonus were taxable under the head "Salaries" as defined by section 7 of the Act, the relevant portion whereof reads as under: "7. Salaries.-(1) The tax shall be payable by an assessee under the head 'Salaries' in respect of any salary or wages, any annuity, pension or gratuity, and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of, the Government, a local authority, a company or any other public body or association, or any private employer; and for the purposes of this sub-section advances by way of loan or otherwise of income chargeable under this head shall be deemed to be salary due on the date when the advance is received." The admitted facts in the case are that the assessee was the managing director of Messrs. Punjab Distilling Industries Ltd. and his remuneration according to the agreement executed between him and the company were as noticed above; that for the relevant year the assessee did not receive and the company did not pay anything towards salary, commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e words "which are allowed to him by or due to him" in section 7 of the said Act, inasmuch as payment itself is immaterial. In Commissioner of Income-tax v. L. W. Russel, the Supreme Court was concerned to find out whether an employer's share of the contribution towards premiums in effecting policies of insurance of its employees in a superannuation scheme devised by the employer for the benefit of its employees was taxable in the hands of the employees. On a construction of the rule of the scheme, it was held that until an employee attained the age of superannuation, he did not acquire any vested right in the employer's share of the contributions towards the premiums and, at best, he had a contingent right therein. So, whether the employer's contribution was a perquisite within the meaning of section 7(1) of the Act and thus taxable depended upon when the vested right was acquired by the employee. This vested right was only in respect of such sums which the employer was under an obligation to pay and the employee had a right to claim; it could not apply to contingent payments to which the employee had no right till the contingency occurred. The employer's contributions towards p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny point of time would be immaterial for, according to the agreement between the assessee and the company, the income from these three sources was allowed to the assessee and was due to him whether it was claimed or not and whether it was paid or not. Reliance was placed on the decision of the Supreme Court in Morvi Industries Ltd. v. Commissioner of Income-tax. This was a case of an assessee who was the managing agent of its subsidiary company. The assessee was entitled to receive an office allowance of Rs. 1,000 per month, a commission at 12 1/2 per cent. of the net profits of the managed-company and an additional commission of 1 1/2 per cent. on all purchases of cotton and sales of cloth and yarn. In the accounting years ended on 31st December, 1954, and 31st December, 1955, the managed-company suffered losses and the assessee earned only commission on the sale of cloth and yarn for the two years. The total amounts including the office allowance which the assessee was entitled to receive were Rs. 50,719 and Rs. 13,963 for the two years. Under clause 2(e) of the managing agency agreement, the commission was due to the assessee on 31st December, 1954, and 31st December, 1955, resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f work, it is a condition precedent to the recovery of any salary or wages in respect thereof that the service or duty shall be completely performed, unless the employer so alters the contract as to entitle the servant to regard it at an end, in which case the whole sum payable under the contract becomes due, or unless there is a usage that the servant is entitled to wages in proportion to the time actually served. But, when the contract, though in respect of work terminating at a particular time, is to be construed as providing that remuneration shall accrue due and become vested at stated periods, such remuneration constitutes a debt recoverable at the end of each such period of service." Bhagwati J. also observed that: " Section 219 of the Indian Contract Act also provides that in the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of such act." Relying on this rule, it was urged that inasmuch as the salary of Rs. 5,000 became due and claimable month by month, the sum of Rs. 60,000 representing the salary for the whole year was taxable as income. The word "income" has not been defined in the Income-tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a right to receive the payments from the companies as at the date of the transfers of the managing agencies in favour of the transferees no income can be said to have accrued to them. They had no doubt rendered services as managing agents of the companies for the broken periods. But, unless and until they completed their performance, viz., the completion of the definite period of service of a year which was a condition precedent to their being entitled to receive the remuneration or commission stipulated thereunder no debt payable by the companies was created in their favour and they had no right to receive any payment from the companies. No remuneration or commission could, therefore, be said to have accrued to them at the dates of the respective transfers." The argument in E. D. Sassoon's case that commission could not be ascertained till the accounts were made up and so could be said to accrue only when the accounts were made up did not find favour with the court. It was held that accrual of income does not depend on its ascertainment or the accounts cast by the assessee. Or, in other words, computation of the profits has nothing to do with accrual thereof. The above decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances found by the Tribunal and not about the facts and circumstances that may be found by the High Court. We have earlier referred to the facts found and the circumstances relied on by the Tribunal, the final fact-finding authority. It is for the Tribunal to find facts and it is for the High Court and this court to lay down the law applicable to the facts found. Neither the High Court nor this court has jurisdiction to go behind or to question the statements of fact made by the Tribunal. The statement of the case is binding on the parties and they are not entitled to go behind the facts found by the Tribunal in the statement." Mr. Manchanda urged that in view of the decision in the above case, all that we are entitled to see is the statement of the case and not the orders of any other authority as is contended by Mr. Sharma. In Praise Co. Ltd. v. Commissioner of Income-tax a Bench of the Calcutta High Court had taken the view that the orders of the Appellate Assistant Commissioner and the Income-tax Officer can be looked into and reliance in this behalf was placed by the Bench on the decision of the House of Lords in Griffiths v. J.P. Harrison (Watford) Ltd. Praise C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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