RANKIN, J. - (1.) THE assessee are the Anglo-Persian Oil Company (India), Limited, a company incorporated in England. They have since 1921 carried on in India the business of selling fuel oil and other products through selling agent paid by commission on sales. Until 1928, the selling agents were M/s Shaw Wallance and Company but in that year the assessees determined this agency and a new company called the "Burma Shell Oil Storage and Distributing Company of India" became the selling agents of the asses sees. Pursuant to certain verbal negotiations, the assessees in August, 1928, paid to M/s Shaw Wallace and Co., the sum of Rs. 3,25,000 as compensation for the loss of their office as agents to the assessees.
(2.) THE payment made in 1928 came to be considered by the Income Tax authorities when dealing with assessments for the year 1929- 30. In that year of assessment, the present assessees -the Anglo Persian Oil Company (India), Ltd.-put forward the payment as a permissible deduction from their gross profits and their claim was allowed. M/s Shaw Wallace & Co., the recipients, were at first assessed upon that sum as part of their profits of the previous year, but the question was taken by them to this High Court, where it was decided (13th Jan., 1931) that the sum received was not income, profits or gains within the meaning of the Income Tax Act. The Income Tax authorities appealed from this decision to the Privy Council, but meanwhile proceeded under Sec. 34 of the Act to re-open the question with the present assessees, claiming that as the High Court had held that in the hands of the recipients it was a receipt on capital account, it must needs follow that in relation to the business of the assessees it was in the nature of capital expenditure, or a "capital payment." The ITO, the Asstt. CIT, and the CIT have all agreed in this and appear to regard it as a simple and obvious truth. The two questions referred to us by the CIT under S. 66 of the Act are as follows : "1. Whether the sum of Rs. 3,25,000 being money paid by the Company in a lump sum as compensation for loss of agency whereby the Company relieved itself of future annual payments of Commission chargeable to revenue account, can be disallowed as being an improper deduction from the income, profits or gains of the business and whether an equivalent part of the Company's income was chargeable to tax therefore." "2. Whether Sec. 34 of the said Act could in law be applied in the circumstances of the case to re- open the assessment and review a deduction made and allowed and whether an equivalent part of the income could be subsequently held to be a part of the income which had escaped assessment." Now, after this Reference had been made, the appeal in the case of M/s Shaw Wallace and Co., was decided by the Judicial Committee (14th March, 1932) vide 1932 Comp. Cas. 276. The appeal was dismissed, but the finding that the money received by M/s Shaw Wallace & Co., was not income, profits or gains within the meaning of the Indian Act was in no way based upon the view that it was a receipt on capital account. Indeed, upon the facts as stated in the case then before their Lordships, they do not appear to me to have thought that view correct in the absence of any assignment of good-will or other asset.
(3.) NOW , the present assessees, who after all were no parties to the proceedings to assess M/s Shaw Wallace & Co., and had no opportunity therein at any time to put forward any facts about their own business and how they came to make this payment, took the proper steps to do so before the CIT in so far as this was necessary to meet the adverse findings of the ITO and Asstt. CIT. Their petition the CIT has on all material points accepted as a statement of truth and has, very fairly, incorporated in his own statement of the facts. In particular, he has in formulating the first of the two questions submitted, embodied the statement that the Rs. 3,25,000 was "money paid by the company in a lump sum as compensation for loss of agency whereof the Company relieved itself of future annual payments of commission chargeable to revenue account." This is part of what was pleaded by the assessees as bringing them within the decision of the English Court of Appeal in Dale's case (Anglo-Persian Oil Co. vs. Dale) and as showing that the payment was not in the nature of capital expenditure. Save for their reference to the Shaw Wallace case, neither the Asstt. CIT, nor the CIT has dealt on the merits with the contention of the present assessees. Yet the parties are different, the question of law is different and the statement of facts in the two cases is noticeably different.;