Law:

Section:

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Income - Chargeable as - Assessment year 1952-53 - Assessee company was managing agents of various companies including one 'G', in which assessee held a large block of shares - In 1951, board of directors of 'G' decided to terminate agency against payment of certain amount to assessee - Whether termination of managing agency in question had resulted in destruction of source of in come of assessee and, thus, amount received by assessee was capital receipt - Held, yes Section 256 of the Income-tax Act, 1961 [Corresponding to section 66 of the Indian Income-tax Act, 1922] - High Court - Reference to - Assessment year 1952-53 - Whether neither High Court nor Supreme Court has jurisdiction to reappreciate material on record to find out whether facts found by Tribunal are correct or not - Held, yes FACTS The assessee company was acting as a managing agents of various companies including one 'G'. The assessee acquired a large block of shares in 'G'. In 1950, 'G' was converted into a public company. Thereafter, the assessee was not entitled to any commission on sales, etc., in view of the provisions of the Indian Companies Act, 1913, as amended in 1939. Hence, a fresh agreement was entered into between the assessee and the 'G' on 10-5-1960, under which the assessee company was entitled to an office allowance of Rs. 5,000 per month and a commission of 10 per cent of the net profits. The Board of directors of the managed company had taken a decision to terminate the agency of managing company. An extraordinary general meeting of the shareholders of the managed-company approved the resolution of the board of directors on 31-3-1951. That meeting also recommended a payment of Rs. 18 lakhs to the assessee as compensation. That resolution was communicated to the assessee on 3-4-1951, and the latter accepted it on 10-4-1951. In the assessment for the assessment year 1952-53, the ITO included aforesaid amount in the total income of the assessee. On appeal, the AAC held that the amount in question represented compensation received by the assessee company for the termination of…

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