R G S NAIDU AND CO Vs. COMMISSIONER OF INCOME TAX AND EXCESS PROFITS TAX MADRAS
LAWS(SC)-1960-12-1
SUPREME COURT OF INDIA (FROM: MADRAS)
Decided on December 14,1960

R.G.S.NAIDU AND COMPANY Appellant
VERSUS
COMMISSIONER OF INCOME TAX AND EXCESS PROFITS TAX,MADRAS Respondents





Cited Judgements :-

COMMISSIONER OF EXCESS PROFITS TAX VS. RAMGOPAL GANPATRAI AND SONS LTD [LAWS(BOM)-1971-3-9] [REFERRED TO]
CEPT VS. RAMGOPAL GANPATRAI AND SONS LIMITED [LAWS(BOM)-1971-7-6] [REFERRED TO]
AJAY KUMAR JAISWAL VS. SHANTI SINGH [LAWS(ALL)-1998-4-112] [REFERRED TO]
INDIAN COUNCIL OF AGRICULTURAL VS. UNION OF INDIA [LAWS(ALL)-2012-1-274] [REFERRED TO]
INDIAN COUNCIL OF AGRI RESEARCH VS. UNION OF INDIA AND OTHERS [LAWS(ALL)-2013-1-494] [REFERRED]


JUDGEMENT

SHAH, - (1.)THE following Judgment of the court was delivered by
(2.)THESE appeals relate to Excess Profits Tax liability of the appellants in respect of two chargeable accounting periods 1/04/1944, to 31/03/1945, and 1/04/1945, to 31/03/1946.
The appellants were under an agreement dated 11/07/1945, appointed managing agents for 20 years of the Coimbatore Spinning and Weaving Co, Ltd.-hereinafter referred to as the company. Prior to 1/10/1944, the appellants were the Managing Agents of the Coimbatore Mills Agency Ltd--hereinafter referred to as the Agency Company who were the Managing Agents of the company. The year of account of the appellants ended on March 31, of the company on June 30, and of th the Agency Company on September 30. Under the agreement by which the appellants were appointed 'managing agents, the following remuneration was provided: 1. Office allowance at Rs. 1,500.00 per mensem; 2. Commission at 1% on all purchases of cotton and stores and 21/2 on all capital expenditure incurred from time to time; and 3. Commission at 10% on the net profits of the company due and payable yearly immediately after the accounts of the company were closed.

For the assessment year 1945-46, the appellants submitted a return of their income inclusive of the following items: JUDGEMENT_1007_AIR(SC)_1961Html1.htm

This return was accepted by the Additional Income-tax Officer, Coimbatore I and II Circles, and the appellants were assessed to income-tax. Excess Profits Tax was also worked out on the same basis for the chargeable accounting period ending 31/03/1945. For the assessment year 1946-47, the appellants submitted a return of their income which included the following items: JUDGEMENT_1007_AIR(SC)_1961Html2.htm

The Tax Officer in charge of the assessment directed that the commission on purchases and capital expenditure be taken into account for the year 1/04/1945, to 31/03/1946, and that the receipts-be computed accordingly. The amount of Rs. 1,127.00 attributable out of item 4 was accordingly taken into the account of the previous year after reopening the assessment under s. 34 of the Income-tax Act, and the commission on the profits of the company was apportioned between the period 1/10/1944, to 31/03/1945, and 1/04/1945, to 30/06/1945, by the application of r. 9 of Sch. 1 of the Excess Profits Tax Act. The Tax Officer also determined the proportionate commission payable under items 3 and 4, for the period ending 31/03/1946, and as a result of the apportionment, the liability of the appellants, original and revised, for income tax and Excess Profits Tax for the assessment year 1945-46 and chargeable accounting period 1/04/1944, to 31/03/1945, stood as follows: JUDGEMENT_1007_AIR(SC)_1961Html3.htm

(3.)FOR the assessment year 1946-47 and chargeable accounting period 1/04/1945, to M 31/03/1946, tax liability was computed at: JUDGEMENT_1007_AIR(SC)_1961Html4.htm
The orders of assessment for income tax and Excess Profits Tax were confirmed by the Appellate Assistant Commissioner and the Income-tax Appellate tribunal. On the applications of the appellants for reference under s. 66(1) of the Income-tax Act and s. 21 of the Excess Profits Tax Act, the tribunal drew up a statement of the case and submitted the following four questions to the High court of Judicature at Madras: 1.Whether on the facts and in the circumstances of the case, the Income-tax Officer/Excess Profits Tax Officer was right in taking action under s. 34 and 15 of the Income-tax and the Excess Profits Tax Act ? 2.Whether on the facts and in the circumstances of this case, the provisions of r. 9, s. 1, were properly applied ? 3.Whether on the facts and in the circumstances of the case, the Income-tax Officer/Excess Profits Tax Officer was correct in including the proportionate commission income of Rs. 1,127.00 for income-tax assessment 1945-46 and Rs. 1,43,163.00 plus Rs. 1,127.00 for Excess Profits Tax assessment Tax for the chargeable accounting period ending 31/03/1945, and 4.Whether on the facts and in the circumstances of the case, the proportionate commission of Rs. 37,129.00 and Rs. 2,299.00 were rightly assessed for the assessment year 1946-47?

The High court answered all the questions against the appellants and in favour of the Department. Against the order passed by the High court, these appeals have been preferred with certificate granted under s. 66A(2) of the Income-Tax Act read with s. 21 of the Excess Profits Tax Act.

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