BABULAL NAROTTAMDAS Vs. COMMISSIONER OF INCOME TAX BOMBAY
SUPREME COURT OF INDIA (FROM: BOMBAY)
COMMISSIONER OF INCOME TAX,BOMBAY
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Fathima Beevi, J. -
(1.)The assessee Seth Narottamdas was managing agent of M/ s. Chandulal and Co. Ltd. A resolution for the,, payment of special additional remuneration to Narottamdas at the rate of Rs. 15,000/- per annum was passed on July 20, 1949. In the meantime, a representative suit was filed by the shareholders of the company on 16-7-1949 for perpetual injunction from giving such extra remuneration and for declaring the resolution as illegal. Temporary injunction granted by the trial Court was dissolved on July 20, 1949, on the assurance that the company will not make payment of extra remuneration until the disposal of the suit. The trial Court decreed the suit on 31-10-1956 but on appeal, the High Court by judgment dated 25-11-1955 reversed the decree and held that the resolution was validly passed.
(2.)Chandulal and Co. Ltd., debited the sum of Rs. 15,0001 - in the profit and loss account prepared by it on 22-6-1950 for the year ended 31-12-1949. For the later 1 years, the company showed the sum of Rs. 15,0001 - due under the resolution to the assessee as a contingent liability. The amounts were not paid to the assessee during the relevant years. Narottamdas died on 16-11-1952. The amount of Rs. 58, 125/- was ultimately paid to his heirs in 1956.
(3.)The assessee was maintaining the Mercantile system of accounting. The sum of Rs. 15,000/- was brought to tax for each of the years 1950-51, 1951-52 and 1952-53. For the assessment year 1953-54, the proportionate sum of Rs. 13, 125/- was brought to tax. The Income-tax Officer in making the assessment rejected the contention that no amount was due as extra remuneration in the several years and that 'no income had accrued to the assessee during the said years. The Appellate Assistant Commissioner confirmed the assessment. The appellate Tribunal, however, held the view that no income had accrued to the assessee during the said years and that the amount accrued to the assessee only in November, 1955, when the High Court pronounced the judgment and till that date the amount could not be said to have accrued to him. In this view of the matter, the assessments were set aside.
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