COMMISSIONER OF INCOME TAX BOMBAY CITY Vs. AGARWAL AND CO

JUDGEMENT

(1.) Facts of the case are given in the Judgment. The following question was referred to the High Court at the instance of E.D. Bassoon & Co, Ltd.: "Whether in the circumstances of the case was the managing agency commission liable to be apportioned between the assessee company and the assignee?" The Commissioner of Income-tax referred the same question which arose out of the facts stated above, namely the question: "Whether in the circumstances of the case was the managing agency commission liable to be apportioned between the assessee firm and the assignor?" Both these references were heard together. Chagla, C.J.

(2.) These two references raise the same question of law which arises out of an assignment made by the managing agents of the E. D. Sassoon United Mills Ltd. In favour of the assessee company, and the question relates to the managing agency commission received by the assessee company.

(3.) The facts briefly are that Sir Edward Sassoon and some others constituted a firm, and as a firm they were appointed the managing agents of the E. D. Bassoon United Mills Ltd. on February 24, 1920. This firm at a later date constituted itself into a private limited company, and, therefore, a fresh agency agreement was arrived at between the Mills and the limited company on October 2, 1934. This agreement was substantially on the same terms as the agreement of February 24, 1920. There were negotiations for the transfer of the managing agency between the private limited company, namely. Messrs. E. D. Sassoon & Co. Ltd., and one Mr. Tansukhrai M. Karandia, a partner of the assessee firm, and the terms of the transfer of the agency were agreed upon in a letter dated September 3, 1943. written by E. D. Bassoon & Co. Ltd. to Mr. Tansukhrai. In this agreement, the transaction which was to be entered into was set out and it was provided that, in the event of this transaction being completed in its entirety, the assessee film would be entitled to receive the commission payable by the Mills under the managing agency agreement on the profits for the calendar year 1943. E. D. Sassoon & Co. Ltd. assigned the managing agency under a deed dated January 26, 1945, but the managing agency itself changed hands from December 1, 1943. The managing agency commission for the year 1943 amounted to Rs. 27,94,504, and this amount was paid to the assessee firm in1944. The question that arises is whether the firm of Messrs. Agarwal & Co., to whom the managing agency was transferred, is liable Commissioner of Income-tax, Bombay City vs. Agarwal and Co. (12.09.1951 - BOM... Page 3 of 8 to pay tax on the whole of this agency commission, namely, Rs. 37,94,604, or whether the tax is payable both by Messrs. Agarwal & Co. and by E. D. Sassoon & Co. Ltd. on a proper apportionment being made between the firm and the limited company of the amount of Rs. 27,94,504 received by Messrs. Agarwal & Co.