Sudhindra Mohan Guha, J. - (1.) IN this reference under s. 256(1) of the IT Act, 1961, at the instance of the CIT (Central-II), Calcutta, the following question was referred by the Tribunal for our opinion. "Whether, on the facts and in the circumstances of the case, and on a correct interpretation of cl. 3 (d) of the Agreements dt. 27th Dec., 1966 between the assessee and F. W. Heilgers & Co. (P) Ltd, and between the assessee and Bird & Co. (P) Ltd. the Tribunal is right in law in holding that the amount of commission receivable by the assessee from the aforesaid two companies was Rs. 18,975 for the asst. yr. 1971-72." IN this case the assessee is an individual and the relevant assessment year. is 1971-72. The assessee had shown Rs. 18,975 as commission received from F. W. Heilgers & Co. (P) Ltd., During the relevant period the assessee was the Managing Director of two companies, viz., Bird & Co. (P) Ltd., and F. W. Heilgers & Co. (P) Ltd,. IN the course of the assessment proceedings the ITO noticed that the assessee was entitled to salary and commission from aforesaid two companies in accordance with his agreements dt. 27th Dec., 1966 with each of the two companies. A reference was made to cl. 3(d) of the agreement between the assessee and F. W. Heilgers & Co. (P) Ltd., and the said clause is reproduced below : "The commission payable to the Director in the terms of this agreement shall not exceed such sum as equivalent to the percentage hereinbefore prescribed after taking into account remuneration by way of fees and commission received by the Director as a Director of any company (other than the Company and Bird & Co. (P) Ltd.,) approved by the Company or as a trustee of any provident fund or other trust or for the holders of debentures created by any company (including the company and Bird & Co. (P) Ltd., and any Company approved by the Company) in so far the remuneration payable to such a trustee is expressed to be payable by the company which created such provident fund, superannuation fund or other trust or debentures." According to the ITO, the aforesaid clause clearly laid down that the remuneration by way of fees etc. of any company (other than F. W. Heilgers & Co. (P) Ltd., and Bird & Co. (P) Ltd.,) approved by Heilgers & Co. (P) Ltd. had only to be taken into account for the computation of the commission at 3/4 per cent in the computation for commission. He rejected the assessee's interpretation of cl. 3(d) to the effect that the fees etc. from the companies in the Heilgers group as well as excess fees etc. from Bird group of companies were deductible from the commission payable by those companies to the assessee. IN these circumstances, the sum of Rs. 44,430 representing excess of the fees account from Bird Group of Companies was added to Rs. 18,975 in order to determine the amount of commission at Rs. 63,405 which was included in the computation of the assessee's total income for the relevant assessment year.
(2.) THE assessee came up in appeal before the AAC who agreed with interpretation of cl. 3(d) of the aforesaid agreement as made out by the assessee's learned. representative. Hence, the amount of commission included in the relevant assessment was reduced by Rs. 44,430. Being aggrieved, the Department preferred an appeal before the Tribunal. After hearing both sides, the said appeal was dismissed with the following observations : "After giving due consideration to the rival submissions with reference to the evidence led before us, we do not find any merits in the contentions of the Revenue. The commission of Rs. 18,976 was determined by Bird & Co. (P) Ltd., and F. W. Heilgers & Co. (P) Ltd., as under : Gross Rec. Net Comm. etc. Comm. Bird & Co. (P) Ltd., 29,028 73,458 F. W. Heilgers & Co. (P) Ltd., 67,780 4,375 96,809 77,833 18,975 The said computation has been placed before us on behalf of the assessee in the course of hearing. The ITO reproduced the computation of commission of Rs. 18,975 in his assessment order. The sum of Rs. 44,430 represented the difference between Rs. 73,458 and Rs. 29,028 being fees etc. received from various companies under the management of Bird & Co. (P) Ltd., and Rs. 29,028 as gross commission receivable @ 2/1/4 per cent of the net profit of Bird & Co. (P) Ltd.,. However the bone of dispute lies in the interpretation of cl. 3(d) of the agreement dt. 27th Dec., 1966 between the assessee and F. W. Heilgers & Co. (P) Ltd., and particularly on the issue as to whether the expression "approved by the company" appearing in the said clause refers to both the companies i. e. Bird & Co. (P) Ltd., and F. W. Heilgers & Co. (P) Ltd., A reference to the preamble to the Agreement dt. 27th Dec., 1966 between the assessee and F. W. Heilgers & Co. (P) Ltd., would show that the expression "the company" appearing in the Agreement would refer to F. W. Heilgers & Co. (P) Ltd., in the Agreement. A similar clause with similar expression also appeared in the Agreement dt. 27th Dec., 1966 between Bird & Co. (P) Ltd., and the assessee. It is an admitted position that on list of companies had been drawn out either by Bird & Co. (P) Ltd., or by F. W. Heilgers & Co. (P) Ltd., in accordance with cl. 3(d) of the respective Agreement. The assessee placed before the ITO two letters each dt. 29th May, 1974 addressed by the aforesaid two companies. The ITO partly accepted the contents of these letters because even in the absence of any list of approved companies, he agreed with the computation of commession so far the deductibility of fees etc. received from the companies under the management of F. W. Heilgers & Co. (P) Ltd., was concerned. This indicates clearly that the assessee's interpretation of cl. 3(d) was partially acceptable to the ITO. But he refused to extend his acceptance in respect of the companies falling under the management of Bird & Co. (P) Ltd., From the letter dt. 29th May, 1974 addressed by Bird & Co. (P) Ltd., to the ITO we find that any company in which a Director of this Company became a Director with the knowledge of this Company's Board was taken to be an `Approved Company'. The ITO had simply rejected this contention without bringing on record any evidence to the contrary. F. W. Heilgers & Co. (P) Ltd., had also written to the ITO that according to their interpretation of the Agreement and the practice adopted by them, fees etc. from companies under their management as also excess of fees etc. from the companies falling under the management of Bird & Co. (P) Ltd., were deductible from the commission payable to the assessee. This was also simply rejected by the ITO, without bringing any evidence to the contrary. But two companies were liable to pay commission to the assessee and they joined hands to interpret the provisions of their respective agreement in a manner which was beneficial to them and impliedly they set up in practice of deducting fees etc. received from companies under the respective management from the commission payable to the assessee at the rate of 2/1/4 per cent of the agreements had not only specified an outer limit of the commission payable to the assessee but the said provision also goes to determine the exact sum of commission payable by those companies to the assessee. Considering all these facts and circumstances of the case, we do not find any reason to interfere with the AAC's decision in the matter." Copies of letter dt. 29th May, 1974 addressed by F. W. Heilgers & Co. (P) Ltd., to the ITO, of the letter dt. 29th May, 1974 addressed by Bird & Co. (P) Ltd., to the ITO, and of the Tribunal's order marked respectively annexure `C-1' `C-2' and `C-3' from part of the statement of case.
(3.) THE findings of facts by the Tribunal have not been challenged. We are of the view that the Tribunal was perfectly justified in affirming the order of the AAC. In this view of the matter we answer the question in the affirmative and in favour of the assessee. THEre will be no order as to costs.;