COMMISSIONER OF INCOME TAX Vs. RAI SHAMSHERJANG BAHADUR R B

JUDGEMENT

(1.) IN this reference under Section 66 (1) INcome-tax Act, the question referred to us is as follows:

(2.) THE assesses is the Managing Agent of the U. P. Glass Works Limited. His remuneration was fixed at 15 per cent, of the net profits or a monthly pay of Rs. 1,000/- whichever he would elect at the end of each year. THE duties and powers of the assessee-respondent as Managing Agent are enumerated in Article 17 of the Articles of Association, which is printed at page 12 of the Statement of the Case. THE Managing Agent under the said Article is given the right to manage the business of the company and to do all that may be necessary in connection with that business. In the year of account the assessee elected to receive his remuneration at 15 per cent, of the net profits. THE Income-tax Officer treated this remuneration as business profits, while the case of the assessee is that the remuneration received by him is salary and he is the servant of the company.

(3.) IN one of our recent decisions in -- 'INder-chand Hari Ram v. Commissioner of income-tax, U. P., and C. P.', AIR 1952 All 706 (A) we discussed the distinction between a managing agent and a manager. We pointed out that a managing agent must be entitled as of right to the management of the affiairs of the company, the right being granted by an agreement with the company; secondly, that a manager must always work subject to the control and direction of the directors whereas the control and direction of the directors over the managing agent may be modified by the terms of the agreement; and, thirdly, that a managing agent may be a person, a firm or a company, the manager can be only an individual, We also pointed out that no servant can claim the management of the company as of right and the manager cannot, therefore, do so, while a managing agent has the right to manage the affairs of the company by virtue of the agreement entered into by him with the company.