Shah, J. - (1.) By an agreement dated October 29, 1928 Ciba (India) Ltd.- hereinafter called 'the principals'- appointed one Tejaji Farasram Kharawalla selling agent for the District of Ahmedabad in respect of certain kinds of dyes and dye-stuffs, and agreed to pay him commission at the rate of 121/2 per cent on sales by him of dyes and dye-stuffs of the principals. The commission was to include 'all charges in connection with the upkeep of offices and godown, turnover rebates and contingency expenses etc.'
(2.) The terms relating to commission were modified by agreement dated August 20. 1935 and out of the commission agreed to be paid 71/2 per cent was to be treated as the selling commission and 5 per cent was to be treated as compensation in lieu of the contingency expenses which the selling agent had to meet, "such as commission to Dyeing Masters, agents etc.". The rights of the selling agent were assigned with the consent of the principals to the respondent Company with effect from October 27, 1947. In assessing the income of the Company for the assessment year 1949-50, the Income-tax Officer included in the taxable income Rs. 58,025/- being the difference between Rs. 1,90,538/- received by the Company as "5 per cent commission", and Rs. 1,32,512/- spent by the Company for meeting the charges which the selling agent was to meet. The Income-tax Appellate Tribunal, however, upheld the contention of the Company that in the computation of the income of the Company, the 5 per cent commission" was wholly exempt by virtue of S. 4 (3) (vi) of the Income-tax Act, 1922.
(3.) The Commissioner then moved the Tribunal to draw up a statement of the case and to refer the following question to the High Court of Judicature at Bombay: "Whether on the facts of the case, a portion viz. 5 per cent of the selling agency commission of 121/2 per cent received by the assessee company from M/s. Ciba Ltd. in the course of carrying on the selling agency business is exempt from tax under S. 4 (3) (vi) of the Act ' But the Tribunal only referred the following question: "Whether the assessee company held an office or employment of profit within the meaning of S. 4 (3) (vi) of the Indian Income-tax Act - The application preferred by the Commissioner to the High Court for calling upon the Tribunal to submit a statement on the question originally submitted was rejected, and the High Court answered the question referred by the Tribunal in the affirmative, observing that it had been conclusively determined by their earlier decision in Tejaji Ferasram Kharawalla vs. Commissioner of Income-tax, Bombay (Mofussil) , (1948) 16 ITR 260 which arose out of a proceeding for assessment to tax of the income of the original selling agent under the same agency agreement. It appears that in so observing the. Court was under some misapprehension for the question referred by the Tribunal had not been decided in the earlier judgment.;