Law: Income Tax Act, 1922

Section: 4A(c),10,10(2)(xvi)

Law: Income Tax Ordinance, 1979

Section: 23(1)(xvii)

Income-tax Act, 1922 -- Sections 4A(c), 10(2)(xvi) -- Business both in India and Pakistan -- Managing Agency -- Remuneration of 10% on net profits of all the business done anywhere -- Whether Managing Agency's remuneration on Pakistan's business is allowable in India or Pakistan -- Managing Agency commission -- Admissible deduction -- Company not resident in Pakistan -- Proportionate expenses to be allowed - Management and control of assessee Company's business from 1-8-1947 to 31-7-1948 situated at all material times in India -- Assessee a non-resident -- Corresponding Sections: Income-tax Ordinance, 1979 -- Section 23(1)(xvii) -- ORDER (The Judgment was delivered by Syed Ali Khan, President). The six Income-tax appeals arise out of the appellant's assessments made, respectively, for the charge years 1952-53, 1953-54, 1954-55, 1955-56, 1956-57 and 1957-58. The Business Profits Tax appeals concern the chargeable accounting periods ending the 31st July, 1948, 31st July, 1951, 31st July, 1952, 31st July, 1953, 31st July, 1954, 31st July, 1955, and the 31st July, 1956. 2. Barring the Business Profits Tax appeal concerning the chargeable accounting period ending the 31st July, 1948, which we shall deal with separately, only one objection, which is common to all the other appeals, has been pressed before us. This objection concerns the disallowance of managing agency commission paid to the Managing Agents, C. A. Ltd. The appellant company(hereinafter called "the company") was incorporated in 1936. The first managing agency agreement was concluded on the 14th January, 1937, for a period of fifteen years. On the expiry of this term a fresh agreement was concluded between the company and the Managing Agents on the 13th January, 1951, which was to operate from the 1st August, 1951, for a further period of 15 years. Under the latter agreement, C. A. Ltd., were appointed as the Managing Agents of the company and their remuneration comprised a commission upon the net annual profits of the company at the rate of 10%. The net profits were to be calculated after paying for all the expenses including interest on debentures etc., and depreciation as provided in the annual…

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