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TMI Blog1960 (2) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... in C.A. No. 210 of 1958, the respondent is Mangaldas Girdhar Das Parekh Ltd., a private limited company, which is the managing agent of Rajnagar Spinning Weaving and Manufacturing Co. Ltd., Ahmedabad. The respondents in the two appeals will in the judgment be called the managing agents and the company of which they are the managing agents will be referred to as the managed company. In C. A. No. 162 of 1958 the managing agents were appointed by an agreement dated September 7, 1940, under which they were to receive from the managed company a commission at the rate of 3 1/2% on the sale price of all cotton yarn and cotton cloth manufactured and sold by the company and a commissioner of 3 1/2% on the sale proceeds of all material yarn and fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company the following entry was made : "Rs. 1,05,575-3-0 M/s. Chamanlal Mangaldas & Co.'s commission account credited dated 31-12-1950. Commission from 1-1-1950 to 31-12-1950 calculated on your sales of Rs. 62,36,802 less returns inwards etc., Rs. 3,63,226 equal to Rs. 58,73,557 at 3 1/2% Rs. 2,05,575-3-0 but as per resolution passed by the board of directors on 8-4-1951, commission of Rs. 1,05,575-3-0 only is credited to the account of agents." The income-tax authorities held that the entire sum of Rs. 2,05,575 was taxable income having accrued as commission during the previous year and that Rs. 1,00,000 was a mere voluntary surrender which could not affect the taxability of the whole amount of commission accruing to the managing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial year to enable a distribution of a dividend of Rs. 1,20,000 on the total paid up capital the managing agent was to give up out of the commission an amount up to 1/3 of the commission to enable the distribution of that amount of dividend to the shareholders. On December 28, 1950, a resolution was passed varying the agreement in regard to the payment of commission and adding a proviso to it applicable to years 1950 and 1951, that if the directors having regard to the results of the working of the managed company were of the opinion that a lesser remuneration should be paid to the managing agent for any of the two years the directors shall have the right to fix such lesser remuneration either by way of a lump sum or at a reduced percentage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from other fibres and sold by the company and 10% on the net profits from ginning or pressing operations. Read as an integrated whole it means that the right to receive the commission was at the end of the year because (1) the commission was payable on all cotton yarn and cloth manufactured and sold by the managed company so also the commission on yarn etc. manufactured by the managed company from other fibres and sold by the managed company and all sales could only be determined at the end of the year ; (2) the percentage on total profits could only be determined at the end of the year ; (3) the liability to contribute towards the dividend also could only be determined at the end of the year. This is supported by the entry in the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany where the words used are "amount accrued Rs. 5,11,875", but this entry must be read as a whole and it shows that the amount which the managing agents were entitled to receive was Rs. 4,11,875. No doubt in this case the amounts of commission were credited every six months which only means that as an interim arrangement the accounts of all sales were made up at the end of six months also. But this would not affect the construction of the clause containing the terms for payment of commission nor the reduction made therein as a result of the modified arrangement. The amount which would arise or accrue and the managing agent would have the right to receive cannot be affected by the manner in which the entry was made. Therefore, in both t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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