Hegde, J. - (1.) This is an assessee's appeal by certificate. The concerned assessment year is 1952-53 and the relevant accounting year is the year ended on 31st March, 1952.
(2.) From the statement of the case submitted by the Income-tax Appellate Tribunal 'A' Bench, Calcutta to the High Court of Calcutta under Section 66 (2) of the Income Tax Act, 1922 (in short the 'Act") , the following facts are available,
(3.) The assessee is a private limited Company (which will hereinafter be referred to as the company) . It was functioning as the managing agents of 27 companies including M/s. Greaves Cotton and Co. Ltd. M/s. Greaves Cotton Co. Ltd., was incorporated as a private company in about 1922 and its managing agents was the firm styled Messrs Greaves Cotton and Co. The company acquired a large block of shares in the managing agency company. M/s. Greaves Cotton Co. released their managing agency rights in favour of the company on receiving Rs. 27.34,325/-. On May 8, 1950, the managed company viz. M/s, Greaves Cotton and Co. Ltd. was converted into a public company. There after the company was not entitled to any commission on sales etc., in view of the provisions of the Indian Companies Act, 1913 as amended in 1939. Hence a fresh agreement was entered into between the company and the managed company, on May 10, 1950, under which the company was entitled to an office allowance of Rs. 5,000 per month and a commission of 10 per cent, of the net profits. The new managing agency agreement was to subsist for a period of 20 years with effect from May 8, 1950. On February 28, 1951, the Directors of the managed company appointed a sub-committee to enquire into the question whether the managing agency of the company should be terminated leaving the management of the managed company to the Board of Directors. The sub-committee reported on March 16, 1951 that the managing agency of the company should be terminated. On, March 17, 1951 the Board of Directors of the managed company approved the recommendations. An extraordinary General Meeting of the shareholders of the managed company approved the resolution of the Board of Directors on March 31, 1951. That meeting also recommended a payment of Rs. 18 lakhs to the company as compensation. That resolution was communicated to the company on April 3, 1951 and the latter accepted it on April 10, 1951.;