Law: Income Tax Act, 1922

Section: 23A

Section 104, read with section 143, of the Income-tax Act, 1961 [Corresponding to section 23A read with section 23 of the Indian Income-tax Act, 1922] - Additional income-tax on undistributed profits of certain companies - Assessment years 1952-53 and 1953-54 - Assessee company which acted as managing agents of certain company was as per agreement between them entitled to be receive managing agency commission every year immediately on passing of audited accounts of managed company by shareholder at general meeting - Assessee received commission and credited same in financial year 1952-53 and 1953-54 and claimed that commission did not accrue to them during accounting year 1951-52 as requisite resolution was not passed during accounting period but was passed on 28-3-1953 - ITO, however, included said amounts in assessment for previous year ending 31-3-1952 and 31-3-1953 - On appeal, AAC held, that under managing agency agreement assessee did not have any right to receive commission till general meeting of managed company was held and, therefore, it could not form part of its accounting profits - Whether order of AAC was to be upheld - Held, yes FACTS The assessee-company, was the managing agents of certain managed company. For the accounting period ending 31-3-1952, the assessee was entitled to the managing agency commission under the agreement which was part of the case. Clause 2(e) of the agreement prescribed that such commission would become due and payable to the managing agents every year immediately on the passing of the audited accounts of the company by the shareholders at a general meeting at each and every year during the continuance of these presents. The assessee by crediting the commission in financial year 1952-53 and 1953-54. Claimed that the commission did not accrue to them during the accounting year 1951-52 as the requisite resolution was not passed during the accounting period but was passed on 28-3-1953. The ITO, however, included this amount in the assessment for the previous year ending 31-3-1952 and 31-3-1953. The ITO, declared assessee's taxable income at Rs. 58,503 and income-tax and super tax at Rs. 23,950. In respect of the…

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