9911796707
TMI Blog1984 (3) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the assessee and the said firm of R. Ratilal Co. is governed by an agreement dated 17-11-1972, which for facility of reference we consider it proper to reproduce here. " Articles of agreement made at Bombay on the 17th day of November, 1972, between R. Ratilal and Company, a Partnership at 111, Mahatma Gandhi Road, Bombay-1 (hereinafter called 'the principals') of the one part and Shri Khimji Vijpar Chheda, Hindu inhabitant of Bombay (hereinafter called the joint manager), of the second part and Shri Kishore Khimji Chheda, Hindu inhabitant of Bombay (hereinafter called the joint manager) of the third part : Whereas the principals have been carrying on business at Bombay its merchants, commission agents and brokers ; And whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t endeavours to promote the interest of the principals. 4. The joint managers shall not be directly or indirectly interested in any other business or occupation without the prior permission of the principals. If, however, the joint managers are found to be so interested without the prior permission of the principals, they shall be personally responsible for the losses, if any, in such business and the principals shall not be responsible therefor. But, if the joint managers make any profits in any such dealings, the principals shall be entitled thereto. 5. The joint manager, Shri Khimji Vijpar Chheda, shall during his term of office, be entitled to a commission at the rate of 16 per cent of the net profits, and the joint manager, Shri Ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000, the principals will make good the difference. 7. The joint managers have nothing whatsoever to do with or any interest in any of the assets of the principals. 8. The joint managers shall be at liberty to resign the said office at any time after giving to the principals three months' notice in writing of their intention to do so. The principals shall also be entitled to terminate this agreement at any time upon giving to the joint managers three months' notice in writing of their desire to do so. 9. The principals shall be at liberty from time to time to appoint any other person or persons to attend to the management of the said business of commission agency department jointly with the joint managers or to appoint any such other m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be assessed as such. He placed reliance on a judgment in the case of Vr. C.Rm. Adaikkappa Chettiar v. CIT [1970] 78 ITR 285 (Mad.) in which the assessee was entitled to a fixed salary of Rs. 1,000 per month from M + one-fourth share of the profit earned by M from a partnership business in which he was a partner. It was held that this income was salary income of the assessee. Another case relied upon is CIT v. I.D. Varshani [1953] 24 ITR 328 (All.) in which it was held that the remuneration received by the assessee as managing agent was taxable as income from salaries. In Ram Prashad v. CIT [1972] 86 ITR 122, the Supreme Court of India held that whether or not the managing director is the servant of the company apart from his being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the agents. 4. It is a queer agreement as two persons have been appointed joint managers of the commission agency department of the so-called principals without in any manner specifying how they shall function and who shall be the superior of the two of them and what would happen if there is some difference of opinion between the two. 5. The nature of the business of the so-called principals is commission agency of cotton and although the functions of the so-called joint managers are not specified in the agreement, it appears that their only function was to procure commission business for R. Ratilal Co. Otherwise the agreement should have specified their duties as well as their financial powers. 6. Although the agreement states th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e changed his stand to claim it as salary for the purpose of claiming the benefit of standard deduction for expenses incidental to employment. This conduct of the assessee in treating this income as business income goes a long way against the assessee and reflects to what he himself thought about this relationship. We also find that the assessee is a regular trader in cotton. He is sole proprietor of the firm General Cotton Co. He is also the partner in Asian Cotton Company. R. Ratilal Co. is also a trader in cotton and it is merely probable that this assessee would have some business dealings with R. Ratilal Co. then being an employee of the said company solely devoted to its business. 9. Clause (4) of the agreement prohibits the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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