Law:

Section:

Section 5 of the Income-tax Act, 1961 - [Corresponding to section 4 of Indian Income-tax Act, 1922] - Income - Accrual of - Assessee-firm, was under an agreement, appointed as managing agent of a company - Under said agreement assessee was entitled to receive commission payable on sale price of all cotton yarn and cloth sold and on sale proceeds of all material yarn and fabrics manufactured from other fibres and sold by company and certain per centage on net profits from ginning or pressing operations - Subsequently, said agreement was modified in regard to commission and in terms of said modification managed company decided to pay Rs. 1,00,000 less than commission calculated at rates mentioned in original agreement - Assessee agreed to said modification and an entry to that effect was made in books of company at end of accounting year - Income-tax authorities, however, held that entire sum of commission which assessee was entitled under original agreement, was taxable income having accrued as commission during previous year - Whether since commission was payable on sales which could be determined only at end of year and percentage of total profits which assessee was entitled to receive could also only be determined at end of year, right to receive commission or its accrual was at end of accounting year when all sales were and could be added up and accounts were made up - Held, yes - Whether, therefore, amount which accrued to assessee or which assessee was entitled to receive was Rs. 1,00,000 less than what assessee was entitled to receive under original agreement - Held, yes FACTS The respondent/assessee firm was under agreement appointed as the managing agent of a company. Under the agreement the assessee was entitled to receive from the managed company commission payable on sale price of all cotton yarn and cloth sold and on sale proceeds of all material yarn and fabrics manufactured from other fibres and sold by company and certain per centage on net profits from ginning or pressing operations. On 28-12-1950 the managed company passed a resolution modifying the terms of the managing agency agreement in regard to the commission and added a proviso that for…

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