9911796707
TMI Blog1959 (5) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... adajee Dhackjee and Co., Bombay (hereinafter referred to as "the firm"). The firm used to pay to each of its three employees, including the respondent, a commission of one per cent. on its total annual turnover in its Colour Department in addition to their respective salaries. In connection with the assessment of the firm's income for the assessment year 1945-46, for which the accounting year was Sambat 2000 (covering the period between October 30, 1943, to October 17, 1944), the Income-tax Officer found that the profit and loss account of the Colour Department of the firm had been debited with Rs. 84,540 as and by way of commission paid to three employees of the firm including the respondent, the commission being calculated at three per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and excessive, and not permissible under section 10(2)(xv). After deducting Rs. 1,19,816 being the loss of the Motor Department from the profit of Rs. 5,30,900 of the Colour Department, so arrived at, the total income of the firm was computed at Rs. 4,11,084. As the firm was registered under section 26A of the said Act, no demand was made on the firm in view of section 23(5)(a) and the total income computed as aforesaid was distributed amongst the two partners who were husband and wife. As the wife's share is to be included in the total income of the husband under section 16(3)(a)(i), the entire income of the firm was taken into consideration in the assessment of the male partner. The Income-tax Officer next considered the claim of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Act, but shall be taken into account in determining the total income of an assessee for the purposes of the said Act : (1) Sums received by an assessee on account of salary, bonus, commission or other remuneration for services rendered or in lieu of interest on money advanced to a person for the purposes of his business, where such sums have been paid out of, or determined with reference to, the profits of such business and by reason of such mode of payment or determination, have not been allowed as a deduction but have been included in the profits of the business on which income-tax has been assessed and charged under the head 'business'. Provided that such sums shall not be exempt from the payment of super-tax unless they are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, statutorily charged to tax. The High Court having refused to grant a certificate of fitness for appeal to this court, the Commissioner of Income-tax, Bombay, applied for and obtained from this court special leave under article 136 of the Constitution to appeal to this court. The short and simple question in this appeal is whether, on a true construction of the notification, the respondent is entitled to the relief. A perusal of the notification clearly indicates that exemption from taxation in respect of the sum received by an assessee from a business on account, inter alia, of commission can be claimed only on three conditions, namely : "(1) Where such sum has been paid out of or determined with reference to the profits of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the High Court, the respondent maintains that the profit had been found to have been understated because the net profit, as shown in the order of assessment, was really Rs. 5,30,900. As this real profit had been reduced to Rs. 4,27,139 only by debiting the amounts added back by the Income-tax Officer including the two-thirds share of the commission amounting to Rs. 56,360, it is clear that this commission which had been disallowed had been paid out of the total profit of Rs. 5,30,900. The Department replies that there is a distinction between actual profit and the assessable income and points out that the real profit, as a business proposition was Rs. 4,27,139 while Rs. 5,30,900 was the assessable income arrived at in the manner sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own to have been "assessed and charged under the head business" on the sum paid as commission but not allowed as a deduction. In ascertaining the meaning of the word "charged", the High Court has referred to what have been described as the four processes recognised by the Income-tax Act, namely, (i) assessment, meaning the mode of computation, (ii) the charge, meaning the liability to pay tax under section 3, (iii) the levy, which is the procedure laid down for the realisation of the tax, and (iv) the actual payment. The High Court has placed reliance on section 55 of the said Act where the words "charged, levied and paid" have been used in connection with the payment of super-tax. This does not appear to us to be the right approach. What i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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