Law:

Section:

Section 37(1) , read with section 5 of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv), read with section 4(1)(b)(ii), of the Indian Income-tax Act, 1922] - Business expenditure - Allowability of - Assessment years 1956-57 and 1957-58 - Assessee-company, being managing agent of its subsidiary company and maintaining its accounts on mercantile system, relinquished certain amounts representing fixed monthly officer allowance and commission on sales, payable to it by managed-company in view of heavy financial losses suffered by managed company - Amounts of commission were relinquished after they had become "due" but before they were "payable" in terms of managing agencies agreement - Tribunal held that relinquishment by assessee of its income after it had become due was of no effect and that relinquishment was not for benefit of assessee so as to allow assessee's claim for amounts relinquished as permissible deduction under section 10(2)(xv) of 1922 Act - Whether postponement of date of payment did not affect accrual of income, and fact that amount of income was not subsequently received by assessee would not also detract from or efface accrual of income - Held, yes - Whether since amounts of income for years in question were given up unilaterally by assessee after they had accrued to it, assessee-company could not escape liability to tax on those amounts - Held, yes - Whether since there was nothing to show that amounts were relinquished on grounds of commercial expediency or for advancing assessee's business interests, assessee was not entitled to claim deduction of said amounts as business expenditure under section 10(2)(xv) of 1922 Act - Held, yes FACTS The assessee-company, as the managing agent of its 100 per cent subsidiary company, was entitled to receive a fixed office allowance plus a commission out of the net profits and an additional commission on all purchases of cotton and an equal amount on all sales of cloth and yarn. For the assessment years 1956-57 and 1957-58, the managed company suffered losses and consequently, the commission payable on the net profits was nil. The assessee-company relinquished the managing agency commission after…

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