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TMI Blog1960 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... S JUDGMENT The judgment of the court was delivered by S. K. DAS, J.--These are two appeals with special leave from the judgment and order of the High Court of Hyderabad dated April 10, 1953, in two references under section 48(3) of the Hyderabad Excess Profits Tax Act. The question which the High Court answered against the assessee in the said references was : "Whether in the circumstances of the case, the officers of the excess profit tax 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 whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r persons subject to the approval of the board of directors of the respective mills. Till October, 1938, the trustees exercised their powers and performed their functions under the agreements aforesaid through an advisory board, and Quamar Shaffi Tyabji, appellant before us, was appointed chairman of the advisory board on a remuneration of Rs. 1,500 per month plus a certain commission. Sometime in 1938 the advisory board was dissolved, and on December 6, 1938, 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 selli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made an annual profits of Rs. 2,00,000. For the selling agency a separate commission was payable on the sale of different kinds of goods subject again to the condition that the annual profits of the two mills did not fall below a particular figure. Clause 6 of the agreement related to the appointment and duties of a mill expert. Clause 7 provided for the termination of the agreement and said that the agreement shall terminate on the trustees terminating the earlier 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 condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, which included a sum of Rs. 2,11,230 representing the appellant's managing agency allowance and commission. The total income for 1352 F. was Rs. 4,90,027 which included Rs. 4,45,775 being the managing agency commission and allowance of the appellant. Before the excess profits tax authorities the appellant contended that he was only an employee of the Industrial Trust Fund and his remuneration under the agreement dated December 6, 1938, was merely salary and 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 begi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with all lawful instructions which may be given to him from time to time by his principal, is not subject in its exercise to the direct control or supervision of the principal. Indeed, learned counsel for the appellant accepts as correct the distinction made above and also accepts that the true relation between the mills and the trustees was that of principal and agent ; but he contends that as between the trustees and the appellant the relation was one of master and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 4 relating to remuneration, clause 7 relating to termination of business and the clauses relating to the eventuality of winding up of the mills--all these were appropriate to a business undertaking only and quite inappropriate to a relation of master and servant. The extent of the delegation of powers was also indicated by clause 5 which said inter alia that the managing agent (meaning the appellant) must observe and perform all the terms and conditions of the earlier 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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