K.C.Sen, J. - (1.) In this reference under Section 66(1) of the Income Tax Act 1922, the following question of law has arisen for opinion of this Court:- Whether on the facts and in the circumstances of the case, the sum of Rs. 29,000.00 was rightly held to be the income of the assesses?
(2.) The Rungta Sons Limited [hereinafter described as the assessee) was the Managing Agent of several companies. The assessment year was 1952-53 and the corresponding accounting year ended on the 5th July 1951. The managed companies, viz., Oriental Industrial Engineering Company Limited, Orient Batteries Limited, Rungta Engineering and Construction Company Limited, Variety Engineering Works Limited, Bengal General Trading Company Limited and M. G. R. Iron and Steel Company Limited were liable to pay Managing Agency remuneration and commission to the assessee company during the accounting year as aforesaid amounting to Rs. 29,000/- only. The accounting year of all the managed companies closed on the 5th July 1951. On the 16th December 1952, the shareholders of the assessee company passed a resolution for-going the receipt of the allowance. There were other resolutions of the same nature made by the assessee Company on several dates. The assessee company claimed that the aforesaid amount of Rs. 29,000/-, which had been forgone by it, should not be treated as income in computing its total income. The Appellate Tribunal held that the intention of foregoing was arrived at, much later than the closing of the accounting year, during which the remuneration had already accrued to the assessee and there-fore after accrual, if it had relinquished the claim of the receipt that would only mean a diversion of the profit and, therefore, could not be excluded from the total in- come. It was urged by the assessee company before the Appellate Assistant Commissioner that the Income Tax Officer made all error in adding Rs. 29,000/- in respect of managing agency commission receivable by the appellant from various companies, as it was waived and therefore it should be deemed as 'not received'. The assessee simply wanted to make out that since the right to receive the remuneration was waived, it was not liable to tax. The Appellate Assistant Commissioner found that the waiver of the commission and remuneration took place long after the close of the accounting year in question on the 5th July, 1951 and, therefore, the Income clearly accrued to the appellant during the' period under account and subsequent waiver of the claim to receive this income could not have any effect on its assessment during the assessment year. This order of the Appellate Assistant Commissioner was affirmed by the Income Tax Appellate Tribunal. Their decision ES pointed out before hinges on the fact that as the relinquishment of remuneration was effected beyond the accounting year it could not be in any circumstances be treated as a bar to the assessibility of the said amount towards Income-tax.
(3.) Mr. Meyer the learned Counsel appearing for the assessee company has mainly urged before us that in so far as there was no accrual of income to the assessee as a result of the final settlement with the managed companies, the amount of Rs. 29,000/- is not liable to taxation. Further he argues that the principle which should govern cases like this is that unless and until the money is received actually and not notionally, the question of assessibility could not arise. It is also contended that in such cases it is not necessary that the negotiations ought to have been completed during the accounting year as there is a difference between the actual earning of the income and its accrual. We shall indicate his other contentions later on.;