Law:

Section:

Section 15, read with section 28(i) of the Income-tax Act, 1961 [Corresponding to section 7, read with section 10(1) of the Indian Income-tax Act, 1922] - Salary - Chargeable as - Assessment year 1941-42 - Assessee was managing agent in a company and his remuneration was fixed at 15 per cent of net profits of company or a monthly pay whichever he liked - During relevant previous year, assessee elected to receive his remuneration at 15 per cent of net profits of company - ITO treated his remuneration as business profit - Tribunal found though assessee was called as managing agent, powers conferred upon him under articles were more in nature of powers given to servant and that those powers could be terminated and managing agency agreement itself put an end to, as was decided on by certain resolutions passed by board at time when managing agent was appointed - Thus, Tribunal held that amount received by assessee was salary and not business income - Whether on facts, order of Tribunal was justified - Held, yes FACTS The assessee was the managing agent of a company. His remuneration was fixed at 15 per cent of the net profits or a monthly pay whichever he would elect at the end of each year. The managing agent was given the right to manage the business of the company and to do all that may be necessary in connection with that business. In the year of account the assessee elected to receive his remuneration at 15 per cent of the net profits. The ITO treated this remuneration as business profits, while the case of the assessee was that the remuneration received by him was salary and he was the servant of the company. The AAC affirmed the ITO's decision and held that the amount received by the assessee as commission was business profits. The Appellate Tribunal held that the amount received by the assessee was salary and not business income. On reference: HELD Normally, if a person is called a managing agent, he would be deemed to be carrying on the business of managing agency and would not be a servant of the company. In the instant case, however, the Tribunal pointed out that the duties assigned to the assessee were not such as to enable one to come to a definite…

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