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TMI Blog1954 (4) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... y the former as a guarantee commission agent and as a treasurer was income from business as defined in Section 2(5) of the Excess Profits Tax Act)? There was an agreement entered into between the assessee and the Central Bank of India Ltd., on the 8th of December, 1935, and the assessee was appointed treasurer and guarantee commission agent of the Bank at Agra and at other branches. The agreement is printed at page 5 of the stat6ement of the case. For his work as treasurer the assessee was to get a remuneration of ₹ 100 per mensem. The duties that he was to perform as treasurer are set out in several paragraphs of the agreement. In paragraph 2 it is provided that the assessee shall engage and employ all such subordinate cashiers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission. As guarantee commission agent he had to recommend to the bank merchants and dealers who wanted to borrow money and if the bank accepted the names suggested, then they were termed approved borrowers. If any money was advanced to an approved borrower and he failed to repay the loan, the bank could realise the amount from the guarantee commission agent. The guarantee commission agent was required to furnish a sum of ₹ 75,000 as security which was liable to be replenished whenever it was reduced by reason of a loan advanced to an approved borrower having had to be adjusted against the security. Any legal proceeding against the borrower was to be instituted at the cost of the assessee. All expenses incurred by the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is mentioned in paragraph 20. He was to get ₹ 100 for his work as treasurer and he was to get commission at a sliding, scale for his work as guarantee commission agent. The question, therefore arises whether the work of the assessee as treasurer and guarantee commission agent is service, or is partly service and partly business, or the whole of it is business. The Appellate Tribunal has held that the whole of it is business. Recently in several cases we had 0 consider whether the income could be classified as salary payable to a servant or was income from business. In a contract of service there are three basic concepts which must be borne in mind. A servant does the work for the master and the work done by him is, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible loss or carelessness on the part of the assessee or the subordinate staff maintained under his control, but so far as the other work of the commission agent is concerned the assessee s position appears to us to have been entirely different. It was open to the assessee to spend what he liked, to make such enquiries as he considered necessary and in any manner that he considered convenient and then recommend to the bank the names of persons who wanted to borrow money. It was open to the bank to accept the whole list or to reject the entire list and if the entire list was rejected the assessee would get nothing in return for the expenditure incurred by him in making enquiries about the solvency of the prospective borrowers whose names he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms in the agreement now in question are very similar to the terms of the agreement that were considered by us in Gadodia s case [1951] 20 ITR. 460. Again, in L. Jeewan Lal v. CIT [1953l 24 ITR. 217, we discussed the various tests that might be applied in determining whether the contract was a contract of service or a commercial agreement between two businessmen. We pointed out that if the assessee is entitled to the profits and liable for the losses of a business and has the discretion as to how he has to carry it on, that is inconsistent with contract of service. We also pointed out that the question of the control to be exercised in the carrying on of the business is one of the tests in determining whether the relationship is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not sea why the income cannot be split up merely because there is one agreement. The two defined and the remuneration for each is separate Commissioner of Inland Revenue v. Maxse [1919] 12 Tax Cas. 41, the court of the Appeal held that the assessee must be deemed to have been carrying on the profusion of a journalist and editor and income from such source was to be exempted from excess profits duty that his work as publisher was business for which he was liable for excess profits duty. In that case the assessee had purchased the paper and was doing the work of journalist, editor, as well as publisher and the income was split up into two parts for the purposes of assessment of the excess profits tax. In Gadodia s case (supra) cited above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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