COMMISSIONER OF EXCESS PROFITS TAX Vs. RAMGOPAL GANPATRAI AND SONS LTD

JUDGEMENT

(1.) THIS is a reference under section 66 (1) of the Indian Income-tax Act, 1922, read with section 21 of the Excess Profits Tax Act, 1940. The assessee is a private limited company. The assessments relate to the corresponding chargeable accounting periods ended on 31st March of 1944, 1945 and 1946. An agreement dated 13th July, 1936, was arrived at between the Dhanraj Mills Ltd. , hereinafter referred to as "the mill company", and Raja Dhanrajgir, hereinafter referred to as "the Raja". This agreement will be referred to us "the Raja's managing agency agreement". Under that agreement the mill company appointed the Raja as its managing agent for a period of fifty years, commencing from the date of the registration of the mill company was Rs. 10,00,000 divided into 10,000 shares of Rs. 100 each.

(2.) A tripartite agreement dated 3rd September, 1937, was arrived at between the mill company, the Raja and one Ramgopal Ganpatrai, the karta of a Hindu undivided family, hereinafter referred to as "the H. U. F. " This agreement will be referred to as "the tripartite agreement". By clause 4 of the tripartite agreement it was stipulated that the then existing Raja's managing agency agreement do stand cancelled and the mill company agreed to enter into and execute a new managing agency agreement appointing the H. U. F. as its managing agent for the period and upon the terms and conditions contained in the engrossment of the agreement in that behalf which had then already been prepared.

(3.) AS contemplated by the tripartite agreement, an agreement bearing the same date, viz. , 3rd December, 1937, was executed between the mill company and the H. U. F. This agreement will be referred to as "the H. U. F. 's managing agency agreement". By clause 1 of that agreement the mill company appointed the H. U. F. as its managing agent from 3rd September, 1937, for a period of twenty years on the terms and conditions contained in that agreement. Clause 4 of that agreement stipulates that the remuneration of the H. U. F. as such managing agent should comprise, inter alia, of a commission to be calculated as provided in that agreement. It further provides that the commission would be calculated for every year and clause 5 provides that it shall become due to the H. U. F. yearly on the first day of April, immediately following the year ended 31st March in respect of which that commission was to be calculated and paid.