Law:

Section:

Section 8, read with rule 4 of First Schedule and rule 3 of Second Schedule, of the Excess Profits Tax Act, 1940 - Capital - Computation of - A mill company had appointed an HUF as its managing agency - In year 1943, said HUF assigned its managing agency to assessee - Assessee paid to HUF certain amount for purchasing HUF's goodwill and also shares of mill company taken over from HUF - Assessee earned remuneration by way of managing agency commission which, as per agreement, became due yearly on first day of April immediately following year ended 31st March in respect of which commission was to be calculated and paid - By virtue of second proviso to section 6(1), standard profits of assessee were calculated on basis of purchase on capital employed in its business - Whether goodwill being an asset of assessee's business, its true market value as on date of its acquisition by assessee was to be included in computation of capital of assessee employed in its business under second proviso to section 6(1) - Held, yes - Whether since shares held by assessee in mill company did not actively or intimately contribute to profits of its business and were held merely for indirect purpose of protecting assessee against a possible depreciation of its managing agency and any possible interference in its smooth day to day working of managing agency by it, they would therefore, be regarded as investment because of provisions of rule 3 of Second Schedule read with sub-rule (1) of rule 4 of First Schedule and was to be excluded in computation of capital employed in assessee's business - Held, yes - Whether commission would be assessed as income accruing or arising in next chargeable accounting period - Held, yes FACTS An HUF was managing agent of the mill company in question under and in pursuance of the HUF's managing agency agreement. The relevant clause of that agreement stipulated that the remuneration of the HUF as such managing agent would comprise, inter alia, of a commission calculated for every year and would become due to the HUF 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…

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