Law:

Section:

Section 5 of the Income-tax Act, 1961 [Corresponding to section 4 of the Indian Income-tax Act, 1922] - Income - Accrual of - Assessment year 1944-45 - Assessee-company were managing agents of three companies - They transferred their managing agencies to other companies during relevant accounting year and received consideration which was taken to 'capital reserve account' - Transferee companies received from managed companies certain amounts as and by way of commission in relevant accounting year - Whether managing agency commission was not liable to be apportioned between assessee-company and respective transferee companies in proportion of services rendered as managing agents by each one of them and no income had accured to assessee-company on dates of respective transfers of managing agencies to transferees or at any time thereafter - Held, yes FACTS Sassoon & Company (Sasoons) were the managing agents of three companies. The Sassoons transferred their managing agencies of the said companies to other companies. The Sassoons executed in favour of the transferee companies formal deeds of assignment and transfer and received from them the net consideration of Rs. 75,77,693. This was taken by them to the "Capital Reserve Account". The accounts of the managing agency commission payable by the respective companies to the managing agents for the year 1943 were made up in the year 1944 and the transferee companies received from managed companies certain amounts as and by way of such commission. For the assessment year 1944-45 the original income-tax assessment of the Sassoons were made on a total income of Rs. 46,48,483. This income however did not include any part of the managing agency commission received by the transferees. The entire amounts of the managing agency commission received by the transferees were assessed by the ITO for the assessment year 1945-46 as the income of the transferees. The Tribunal accepted the transferees' contention that the managing agency commission received by them should be apportioned on a proportionate basis and the transferees should be made liable to pay tax only on the commission earned by them during the period that they…

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