9911796707
TMI Blog1960 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... department were right in treating the income of the assessee or the Industrial Trust Fund as income from business." The High Court answered the question in the affirmative. The point for decision before us is if the High Court correctly answered the question. The relevant facts which led to the question and answer are these. There were two cotton mills in the State of Hyderabad (as it was then known) called Azamjahi Mills and Osmanshahi Mills. They were public joint stock companies. By a Firman-e-Mubarak of 1929 issued by the then Ruler of the State was formed an institution called the Industrial Trust Fund, the purpose of which was to help large and small industries on behalf of the Government of the State. The management of the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , an agreement was entered into between the trustees and the appellant. Clause 11 of the preamble of this agreement recited : "The said trustees are desirous of delegating such of the powers, authorities and discretions as such secretaries, treasurers and agents as also as such selling agents of the said two mills as aforesaid as are hereinafter mentioned to and appointing the said Quamar Shaffi Tyabji as the managing agent of the business of the said trustees as such secretaries and treasurers and agents as also as such selling agents of the said two mills as aforesaid in and for the matters and purposes hereinafter mentioned." The agreement then recited that the approval of the board of directors of the two mills having been obtained, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier agreements in their favour, provided however that in the event of the said trustees deciding to transfer the said respective agreements and the rights thereunder to any one they shall in the first instance offer the same to the said managing agent on the same terms and conditions as may have been offered to them and on the further term that the managing agent shall make arrangement to the satisfaction of the said trustees for the payment to them in cash or otherwise of the moneys they have spent in purchasing the managing agency rights of the said two mills as also the balance then due of the unsecured loans (i.e., other than first debenture loan) they have and may hereafter advance to the said two mills so that the said managing agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not income derived from business and therefore not liable to excess profits tax. The excess profits tax authorities negatived this contention, and as required by the High Court the Commissioner of Income-tax, Hyderabad, referred the question of law which we have set out at the beginning of this judgment to the High Court for decision. On behalf of the appellant it has been submitted that on a true construction of the relevant agreements the Industrial Trust Fund was the managing agent as also the selling agent of the two mills ; the trustees employed the appellant on certain terms and gave him certain powers, and therefore the appellant, an individual and not a firm, was not carrying on an independent business of his own ; he was just car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd servant. We consider that this contention is wholly unsound. We have examined the original agreement between the mills and the trustees dated April 12, 1934. Clause 9 of that agreement said that "the agents may regulate and conduct their proceedings in such manner as they may from time to time determine and may delegate all or any of their powers, authorities and discretions as secretaries, treasurers and agents of the company to such person or persons and on such terms and conditions as they may think fit, subject to the approval of the board of directors of the company." The delegation in favour of the appellant was made under this clause. The position was therefore this : the trustees as agents had express authority to name another pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier managing agency and selling agency agreements in favour and on the part of the trustees ; in other words, the entire managing agency business was handed over to the appellant. Learned counsel for the appellant emphasised clause 9 which we had quoted earlier and said that it showed that the appellant could not assign any of the benefits under the agreement, which was personal to himself. We do not think that clause 9 changed the quality of the relation between the trustees and the appellant. The managing agency agreement must be read as a whole, and so read the conclusion which clearly emerges is that the appellant was undertaking a business of his own in accepting the duties and responsibilities of a managing agent of the two mills u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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