Law: Income Tax Act, 1961

Section: 28,28(ii)(c)

(a) Income-tax---Income---Accrual of income---Time of accrual---Managing agency agreement providing for remuneration at a certain percentage and a minimum remuneration---Additional remuneration payable if it exceeded minimum after audited balance-sheet and profit and loss account were approved by company at its general body meeting---Additional remuneration accrued only after such general body meeting of company---Indian Income Tax Act, 1961. The assessee was a private limited company and during the previous year relevant to the assessment year 1970-71, the assessee acted as managing agents for M and also S. The assessee entered into an agreement on March 1, 1965, with M and under the agreement, the assessee was entitled to claim remuneration at a certain percentage, on a sliding scale', from the profit of the company as computed under the provisions of sections 349 to 351 of the Companies Act, 1956. The assessee-company was entitled to a minimum remuneration of Rs.30,000. The assessee-company entered into another agreement with S and there also the assessee was entitled to claim remuneration of f0 per cent. of the net profit and the assessee was also entitled to a minimum remuneration of Rs.12,000 per annum. The minimum remuneration was received every month. The additional remuneration which was payable to the assessee was with reference to the profit at a specified percentage in the event of remuneration payable exceeding the minimum remuneration under the agreement, and the additional remuneration drawn by the assessee was only after the audited balance-sheet and profit and loss account of the relevant year were placed before the general body meeting and approved by the general body meeting. The assessee was maintaining its accounts on the mercantile basis and the Department was also making assessment up to the assessment year 1970-71 on the basis that the additional remuneration was assessable in the hands of the assessee when the relevant balance-sheet and profit and loss account was placed before the annual general meeting and approved in the said meeting. But, in the year 1971-72, the Income-tax Officer changed .the method of taxation of the additional…

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