Law:

Section:

Income-tax---Income-Accrual-Company - Managing agency firm-Commission of 15 per cent. on net profits with minimum of Rs. 25,000 in case of inadequacy of profits-Income of managed company less than Rs. 25,000-Commission whether accrues to managing agency firm-Waiver of commission-Question of fact. The assessee-firm, which acted as the managing agent of a company, was entitled, under clause 2(b) of the managing agency agreement, to a remuneration of "15 per cent. commission on the net profits of the company . . , with a minimum profit of Rs. 25,000 a year in case of inadequacy of profits." In the financial Year ending March 31, 1954, relevant to the assessment year 1954-55, the managed company had made a profit of Rs. 5,571 before charging the managing agent's commission. There was no credit in the books of the assessee-firm towards the managing agent's commission for the relevant financial year ending Match 31, 1954. For the financial year ending March 31, 1955, though the managed company had suffered a loss of Rs. 1,11,846, the assessee-firm had been paid the minimum commission of Rs. 25,000. The question was whether the assessee-firm was assessable to tax on the sum of Rs. 25,000 for the assessment year 1954-55 Held, (i) that the assessee-firm was entitled to a minimum commission of Rs. 25,000 towards remuneration for the financial year ending March 31, 1954, and that amount accrued to the assessee-firm in the accounting year. The sum of Rs. 25,00 was, therefore, assessable in the hands of the assessee. firm as its income for that year: (ii) That, since the Appellate Tribunal had found as a fact that there was no waiver in respect of the sum of Rs. 25,000, the sum was not allowable as a deduction in computing the profits of the assessee-firm.                                                                                                                    …