PALANI ANDAVAR MILLS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question has been referred to us for our opinion under Section 256(1) of the Income-tax Act, 1961 :

(2.) THE circumstances under which the question came to be referred are these. THE assessee-company entered into an agreement, dated April 20, 1942, with Messrs. Bagyalakshmi and Company, whereunder the said Bagyalakshmi and Company was appointed managing agents of the assessee for a period of 20 years. Under the terms of the said agreement, the managing agents were entitled to be paid as remuneration for their services, the following amounts :

(3.) ON a further appeal to the Tribunal by the revenue the Tribunal took the view, based on the decision of the Supreme Court in E.D. Sassoon & Co. Lid. v. Commissioner of Income-tax, and Cotton Agents Ltd. v. Commissioner of Income-tax, that the managing agents were not entitled to payment of remuneration calculated at 10% of the net profits as they had ceased to be managing agents on August 15, 1960, i.e., before the end of the accounting year, when alone the right to receive the remuneration accrued. In that view, the Tribunal restored the order of disallowance of Rs. 62,144.