Law:

Section:

Section 2(1A) , read with section 10(1) of the Income-tax Act, 1961 [Corresponding to section 2(1), read with section 4(3)(viii) of the Indian Income-tax Act, 1922] - Agricultural income - Assessment year 1942-43 - Whether where an assessee receives income, not itself of a character to fall within definition of agricultural income, such income does not assume character of agricultural income by reason of source from which it is derived or method by which it is calculated - Held, yes - Whether where assessee received no agricultural income as defined by the Act but, received remuneration under a contract for personal service calculated on amount of profits earned by employer, payable, not in specie out of any item of such profits, but out of any moneys of employer available for purpose, remuneration received was not agricultural income and was not exempt from tax - Held, yes FACTS The assessee-company was the managing agent of a company. As per agreement the assessee was entitled, in consideration of services rendered, to a minimum annual salary of Rs. 10,000 which was payable irrespective of whether or not the principal company had made any profit. If, in any year, ten per cent of the profits made by the principal company exceeded Rs. 10,000 then the agent got remuneration calculated as a percentage upon the profits of the principal company, without regard to the sources from which those profits were derived. One of the sources of income of the principal company was the manufacture of sugar from cane grown on its own farms and from other cane brought from outside. The assessee claimed that as its remuneration was calculated with reference to the income of the principal company, part of which was agricultural income, such part of the remuneration as was proportionate to the agricultural income of the principal company, was itself agricultural income and as such exempt from income-tax. This claim was rejected by the ITO, and in appeal by the Assistant Commissioner and the Tribunal. On reference : HELD Where an assessee receives income, not itself of a character to fall within the definition of agricultural income contained in the Act, such income does not assume…

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