Dipak Kumar Sen, J. - (1.) This reference arises out of the income-tax assessment of Messrs. Williamson Magor & Co. Ltd. in the assessment year 1964-65, the relevant previous year having ended on the 31st December, 1963. The assessee, inter alia, acts as managing agents, secretaries and/or treasurers of other limited companies and at the material time had been appointed as the secretary of one Tukvar & Co. Ltd. under an agreement dated the 26th July, 1954, which, inter alia, provided as follows : (a) The assessee was appointed as secretary on and from the 1st July, 1954, to continue in such employment for a period of 10 years certain from the said date. (b) The assessee would provide suitable office and establishment for Tukvar & Co. Ltd., Calcutta. (c) Subject to the provisions of the Companies Act the assessee would in addition to their duties under this agreement perform other duties and work for Tukvar & Co. Ltd. which the directors of the latter may decide and would receive reasonable and proper remuneration therefor as would from time to time be agreed between the parties. (d) The general management of the affairs of Tukvar & Co. Ltd., viz., business transactions, property etc., would be entrusted to the assessee, who would be under the control and direction of the directors of Tukvar & Co. Ltd. (e) In addition to the power or authority expressly conferred by the agreement the assessee would be entitled to exercise powers of the directors of Tukvar & Co. Ltd. as may from time to time be lawfully delegated to them provided that the assessee would not exercise power to borrow moneys except within limits previously fixed by the directors at a board meeting. (f) The assessee would be at liberty at any time to resign its office as secretary upon leaving at the registered office of the Tukvar & Co. Ltd. three weeks' notice in writing of their intention to do so.
(2.) The assessee acted as the secretary of Tukvar & Co. Ltd. till November, 1957. In 1955, Tukvar & Co. Ltd. was in need of funds. On a guarantee furnished by the assessee, Tukvar & Co. Ltd. was allowed overdraft facilities from a bank. In November, 1957, the assessee resigned voluntarily from Tukvar & Co. Ltd., who however, did not repay the bank the money due on overdraft and the assessee as the guarantor had to pay a sum of Rs. 1,68,292 to the bank being the amount due on the said overdraft account on account of principal and interest.
(3.) On or about the 15th September, I960, Tukvar & Co. Ltd. filed a suit for the recovery of a sum of Rs. 22,80,554 against the assessee alleging misappropriation, breach of trust and detention of its movables by the assessee. On the 18th November, I960, the assessee filed a suit against the said Tukvar & Co. Ltd. claiming Rs. 2,08,611.68 on account of the money paid to the bank on account of the overdraft of Tukvar & Co. Ltd. The disputes between the parties were ultimately settled out of court in the relevant assessment year. The assessee. and the said Tukvar & Co. Ltd. withdrew their respective suits.;