Law:

Section:

Section 39, read with section 37(1) of the Income-tax Act, 1961 (Corresponding to section 12A, read with section 10(2)(xv) of the Indian Income-tax Act, 1922) - Managing agency commission - Assessment years 1961-62 to 1965-66 - Assessee was carrying on business of managing agents in partnership with 'H' - After death of 'H', assessee started said business in sole proprietorship - For carrying on said business, assessee entered into agreement with 'P' i.e. wife of deceased 'H' - This agreement was necessary as assessee needed help of voting power which was under control of 'P' as also sum of Rs. 50,000 which she agreed to invest for purpose of obtaining or carrying on managing agency business as sole proprietor - Assessee in pursuance of terms of this agreement, agreed to give 25 per cent share in income of managing agency business to 'P' - Whether, on facts, it could be said that there was adequate consideration for agreement whereby assessee bound himself to part with 25 per cent share in managing agency commission - Held, yes - Whether, therefore, all requirements of section 39 were fulfilled and various amounts paid by assessee must be deducted from his income from managing agency - Held, yes - Whether, however, so far as year 1961-62 was concerned, since requirement of filing declaration was not fulfilled, amount paid could not be deducted under section 12A of 1922 Act - Held, yes - Whether, moreover, since assessee did not incur any overriding obligation at source to part with income, such a claim could not be allowed, even, under section 10(2)(xv) of 1922 Act - Held, yes - Whether in view of aforesaid, it could be concluded that except for assessment year 1961-62, amounts paid by assessee for all other assessment years in question, were to be deducted from his income under section 39 - Held, yes FACTS The partnership business between assessee and his uncles 'H' consisted of promotion of new companies, to be managing agents of such companies or of any other company and, in particular, to be the managing agents of 'BMC'. 'H' died on 14-6-1959, and the partnership stood dissolved under section 42(c) of the Partnership Act, because in the partnership deed…

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