Law: Income Tax Act, 1922

Section: 66(1)

JUDGMENT Jagadisan, J.-This reference arises out of the assessment of one Nagi Reddy to income-tax for the assessment year 1956-57, the relevant "previous year" being the calendar year 1955. He received in the year of account Rs. 72,426 and Rs. 5,142 as remuneration from the two companies, "Vijaya Productions Ltd." and "B.N.K. Press Ltd." respectively, of which he was the managing director. He claimed that this was business income assessable to tax under section 10 of the Act. This was not accepted by the Income-tax Officer, but on appeal, the Appellate Assistant Commissioner upheld the claim. The department filed an appeal to the Income-tax Appellate Tribunal which held that the amount is not to be dealt with under section 10 of the Act, but granted relief to the assessee in allowing a sum of Rs. 29,485 to be set off against the profits of the year. Both the assessee and the department filed an application under section 66(1) of the Act before the Tribunal, and the following questions stand referred to us: "1.Whether the additional remuneration of Rs. 77,569 from both the companies aforesaid constitute income assessable under section 10? 2.If the answer to the above question is in the negative, whether the depreciation allowance of Rs. 29,485 unabsorbed in the assessment of 1955-56 is available to be included in the computation of the profits from business for the year 1956-57 under proviso (b) to section 10(2)(vi)?" Question No. 1 has been referred at the instance of the assessee and No. 2 at the instance of the department. The assessee is the sole proprietor of a business called "Chandamama Publications." The business that was carried on was that of printer and publisher. He was the managing director of a company, Vijaya Productions Ltd., which carried on the business of producing films. He was also the managing director of another concern, called B.N.K. Press Ltd. It appears that he was deriving income from another film producing company called Vauhini Productions Ltd. He was appointed the managing director of Vijaya Productions Ltd. under an agreement dated August 3, 1949. By the terms of that agreement, he became entitled to a monthly remuneration of Rs.…

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