Commissioner Of Income Tax Bombay City v. Chunilal V. Mehta And Sons (P) Ltd

» ar MYTHT TGA, Fras aaty Sal ata ato Agat woe aea (stgaz) fafaes [Commissioner of Income-tax Bombay Chunnilal‘V. Mehta and Sons (P) Ltd.] (LL aaa, 1971) (FTo Ho UHo Fd AT To Ueto waz) —Sftsma graa-dea Taz, 1922 (aredla masz afafaaa, 1922)(1922 t 11), are 10(5-z) fratfeal we are sae afaTtT FUT Fmeta sare afenat & ea Fara fear aat—aut at gat & garfaefara anata & ya nara ofanea aaa ae fag ata AT a THA 1951A eat Bt at Ga ae 1955 F araae afertfea ara wt ea—arfnfsas_Bar (neers earsfien) cafeF agare Sarwar att fraifeatGA Ta afane st THA GT HT AA H arfaearata ael F | geal (faatfcdt oat) wa arate fafate ara S1 aa, 1945 FoFwad wild wa a cH srgae fafats seat F afcafaa Hey ga Heat asfanfaa fear var ary fratfeet wat Aon ata (afera) fafats seat & 21 agat ararafa & fac va saa afaaway wut fear ate ag uF safeagt ary(ase sradl) & gaeq afrwat F wr A ars Heal <aAHA, 1951 FT Naz.afaffedtreal } we & fsage & wafer faa® ofeuracaes Heal F aga faaifet a Nat ay slag Fare Ht aa fara se NACAat 7eae sa sfaaz 2a at qaar dt a faeg fratfeatF sftat MA 8 gHTT FTfear at saat Bard fafa-fasa wr F aaa waH fae grag sea aaa4 ae aarar1 faarea eararele ate are at adhe carats a ag afafraticefear fa wat & faaeaal % aes fasted) 6,000 aaa sfaara ay at ot aaaafaawy a saafea nate % far tan ofefastfta gear (faaysts saaa) 862 & fag snare 31 faatfedt & feat at af ewe fearaz, 1955 F grea atafaazag & ag afafiatfca fear fe araat a aeat ate ofcfeafaat F fratfeeeT 23 Haat, 1951 at cera sfant Med at war alate Za SIU va Atfratem ay 1956-57 % ae aa wT aT AHA 1 aQaT B aqda oe afeaza4 at oq Soa eqrarag Ht fatfna fac| ea araaa A UH Get BT BAT WZ.faar fe sarq ofaawm & aaa at ama ® area faaifedt at sfrax23 aia, 1951 at Meaa at mar ar ate gat saat aT Sat ae fzar fa2,34,000 aaa at sfaax at waa at % fare erfacareita vet att farg afafaasat Str 10(5@)sella eqrsy at way faaizm ag 1956-57 F Huda Sti| eefafavay & eqfaa stat mraz argad, yeas ant X ag adta A é|SRT aaa H faata h faeg ga earaag Fada st wa ge ateafta Hz gg, afafratica—aae afaaway & ara st are & ary 23ata, 195!a fratfedt at afar Mewar at mar ar wei wara-afraat, caer afeaca Hue Rfaaeeal & adla weqata aaa aien aah aun fafear sfamaFR arere oe ofertasfadhart @, setsare afaral at dda qforfan aa Marg gars wa feat ag& fau rq saga ofafafesa ax far art &1 dan za aca 8 feBee ae gare afewatAafears R arey sear A aqd Hara Fsareer afaaal at mea ofvafas car adt fear 8, saeq afaaat ca ara aralat &xtq F fae sware wet at area fe sa meq gifesfas mqua ag garat ae Ba It aa aa ara Bt afafraifee aa fear sat atfee wa aw feSeqA sa Tea adina al can alga ada ofeafan at gah Aersal F warmet Bt fear g1 fated ate safied aradt & a fearsstray faaifedtTTMATT HH TI ay Fae az ater a ag, at wal ¥1 Har way a aahaUF ats Fate cal TE aral st gacit sfafeeat gad ara &1 Rar-cafagina ¢ a fe areafan sfafseat (der 13)1 fafase fasta |qa.53 MiRo eo ATto 114:10 (AUT MART, RATT TATA Vo MAAR aIAS (Commi- ssioner of Income-Tax, Madras Vs. A. GajapathyNaidu);51 BIgo To AIXo 393:11fama = afgt Ta MIURToATAaa, BETA(Thiagaraja Chettiar Vs. Commissioner of Income-|Tax, Madras);| 47 FIFo Bo Ito 394:“‘Qho Fo gistes yes Heal (ogaz) fafees garAAMAR MAT, Gras ANT-1 [F.E. Hardosstle &Co. (Pvt.)Ltd. Vs.Commissioner of Income-Tax, Bombay City-1]. fafaa adtet afeamfiat : 1968 at fafaa adie dear.1535. 1962 % araee fade dem 52 H gery seq caraay F athe setara, 1967 & faata aie ae % faeg fads eorqa Aart at TE ata ated at ate aAAA Alo THe TIT, Ho WaAAla AIT Al<oUo AAT FeaaT Bt WITS} al UHe To Brat, Mad. to Ho aa, wyAlo Alo HAT AIT AY Cala ATAT eararaa at faata earatfaata Ho uae Bas F fear | catatfaafa gas— faae garg eat a ag za ada F fafteaa HF fac ag wea yeyga @ fe gfosam gan cae baz, 1922 (area aaa afafaan, 1922)(aaaH ‘afafrary’) at are 10(5a) 8 ata gat ae caw aaa & fazfaatfcal wr tata care afew (AafaT Card) F ama AA ae sfaace eq Fy orca fear ary A COMMISSIONER OF INCOME TAX BOMBAY CITY CHUNILAL V. MEHTA AND SONS (P) LTD. August 11, 1971 [K. s. HEGDE and A. N. GROVER, JJ.] Income-tax Act, 1922, s. 10 (5-A)-Compensation received on ter-mination of n1anaging agency taxable under section-Section enacted by Finance Act, 1955--Managing Agency terminated on April 23, 1951-Suit for compensation under agreement filed by managing agcnts-C Compensation amount as determined by High Court received b,r managing agents in December 1955-Managing agents maintaining acco1111ts on mercantile basis-Compensation amount when falls due? -Wltether taxable in assessment year 1956-57. ' The assessee held the managing agency of a public lirr,ited company Under the agreement the assessee was to continue as managing agents D for a minimum period of 21 years. On April 23, 1951 the Directors of the managed company passed a resolution te1minating the sci vices of the assessee as managing agents. This resolution was affi1med by the shareholders at their extraordinary general meeting held on May 23, 1951. There was dispute about the compensation payable to the assessee. Jn a suit filed by the latter the trial judge as well as the Appel-late Bench of the Bombay High Court held that under the terms of E the agreement the assessee was only entitled to liquidated damages at the rate of Rs. 6000 per month for the unexpired period of the agency namely 3 years 2 months and 7 days. The suit was decreed for Rs. 2,34,000 on November 17, 1955 and the .assessee received the amount in December 1955. The assessee contended before the lncbme-tax Officer that as it maintained accounts on the mercantile system and the amount had become due in 1951 the same could not be taxed in the F assessment year 1956-57 under s. IO (5A) of the Income-tax Act, 1922. Before the said section was introduced into the Act by the Finance Act, 1955 compensation received on termination of a managing agency was treated as a capital receipt; after its enactment such compensation became taxable as income. The section was not retrospective, so that if the assessee's plea that the compensation amount accrued in 1951 was accepted it could not be treated as income at all. The Income-G tax Officer and the Appellate Assistant Commissioner rejected the plea. The Tribunal however held that on the facts and circumstances of the case the compensation became due to th.e assessee on April 23, 1951 and therefore it could not be brought to tax in the assessment year 1956-57. The High Court in reference held that the amount was not taxable but the interest thereon could be taxed in 1956-57. The Revenue appealed. HELD: (i) It was rightly held by the High Court .that the assessee was entitled under the agreement to liquidated damages at the rate of Rs. 6,000 per month for the unexpired period of the managing agency. As such the assessee's right to get the compensation arose on April 23, 1951 when the resolution terminating the managing agency was passed. [123A-B] (ii) Section 10 (SA) refers to 'payment due or received'. The expression 'due to' refers to those assessees who maintain their accounts according to the mercantile system of accountancy and the expression 'received by' applies to those assessees who adopt the cash system of accountancy. Since the assessee in the present case maintained the mercantile system of accounting the relevant assessment year for the compensation accruing on April 23, 1951 was the succeeding assessment year. [123 C-D, HJ Commissioner of Income-lax, Ma1ras V. A. Gaj1pa1hy Naidu, 53 l.T.R. 114, applied. (iii) Th, plea on b'hilf of the Revenue that the right to get the amount aro;' wh'n the quantum of comp,nsation was determined by the High Court, could not be accepted. The fact that the assessec was claiming an exorbitant sum to which it was not entitled would not convert its right into a contingent right. [124 E-G] 2. faatfedt ua srgae fafats weal &@ atx gana ana qt vastRBA ATTA AA Ara aT | UH MATa aNard Gy atusw sede fafateara FT aftataa ace eo qa, 1945 % fanfaa fRar qar ari 15 wa, 1933alga arfard ca “fe aeeqa fecfar we Feqhaafer aeady fafats”aa al Up ata fafats weit & on gaee ofan wut fear at) saa HUT& aela fretted aaa 21 av & faq sax afesatagar wat wie gamTa TT TH AZ GT AIA Tz lsat a aed ar Vet Heal sre Paar garg|Frat ae eer a at ore, aa aH ae Hae Heat we aad A wu HF agahaa21 ag at raat & etaa safer aeadt at wut F afua areal ® fanWaT HA areal HT at aT ae F get sr afaare adi arsaa Hreafy& ates fratfedl sace afanat & ale ot wed war tert FUT H esata ayfe sax afanat sfaata 6,000 wat eqaaa ofertas orca eee atx af agewer Tag aan ae fe weal F anatase saat afwafas za sfana &Hg a sare afaaaial at sad afafad ufe att daw A arest faa® fe Bay gre sea aaa oifeafas sa ag F are F aHe aA H za fans HCauay a ate1 HUT H ay ag srafeaa ot fe afe wus A agafear 21 aga aratafa Soar wutave 15 FX afga sregt sfaara sara afuaatayal Vac aaa Br at oat = at saer afenal wafers weala ga at arf F vfare afaat ar ofefaatfea qaaret at ag afr mr TUT H avs 14 8 afaa zg,TCT HRA H BHATT ST TTTT 3. aia, 1951e ade Tawa F cH ane A gafoa geal F7aga & Fat asa at fara haters garg afaaatat ¥ fees a 1 TGIFgated acqdt ate cara afeaatal & ard araeey aaraga gt TT) 23 ATA,1951 Fi, vafeaa Hradl & faeaal A arg afeaatal Fer A faatiedy atNBae Tacs HA HI TH Her Tifea fear 123 ae,1951HY Narcareal 4-AIT TATART aT aaa FH ga aaet Ht gfe He <b23 aie,1951|ala daeq & agauy # fatae Ts A gaea afaaatat at sara afaaeyaAlta HA sl UH gaar fra | eas TATfratfedt A asl Fare fafes-face aaa fee ara F area vara area waa sfae ar arar fearfreqsafer ara, afuaca a aaafad srarafe qaiq dla ag, a Ara ate aAfar & faz 6,000 wat sfanra & faara & maar aes ae Tay wIT,1951® 23 feat & far 4,600 waa ofa ara & ate 77 As BT 2,34,000 wat et —& fag dare at1 fraifee & ga caer at oat & ware He feat) RAH TATfatal F aoa Sard fafe-fase wae aareg wea h fa ofan F ate az:28 are eae HT erat Hea ge safes Teas Te qrag sea earaTay F sHifefeara|aes H are warari safiga wegat a are wr fade far17 waraz, 1955 FT2,34,000 waa at ufs & fac are F feat 2 Aas me ada A ea4feat at gfce ax dt a1 faarem eararedia ate ata caradis a Wt ag|afufiatfca fear fe were ® faareat & ala fraifedd 6,000 waa sfanraa at at maa ufaace at waafad gate & fae Fae ofefaatica raat FeLaidfare gaare ar) fratfcdt & feat at ag xem fearaz, 1955FH area FTI.. gd, BRAFA Daz TH 1955, (faa fafa, 1955) (1955 ar afafranwear 15) ara afafaay & are 10(5a) aeaeafar far ae aH saraogfanal err aga afaazy & aare|a far mafaa ster feat aar sfaaxqaft at sifea Arar sat at fag arer 10(5) # soaftad ar fe fal areaamrqat al cara afar al ater ar saw ser wa arg sfane ar ary darargd & sah sare afeacay wae F otafas wet ar soar awa aeT¥ sara afeaal are feu aa feet areare F ara ae afMary aa TITate & aagart ath afaeandta Ay 1 ag sraer qaaelt et F saa aval FI au|, 5. war fe ex garat Tar g, ga arAa A aa faa sfawr a arqa gsag farutfedt ay fearaz, 1955 % sea gar art fratem-at 1956-57% mraae Thiagaraja Cheltiar & Co. v. Commissioner of Income-lax, Madras, 51 l.T.R. 393 and F. E. Hardosst!e & Co. (P) Lid. v. Commissioner of Income-ta,x, Bombay City I, 47 l.T.R. 394, approved. (iv) The plain and unambiguous words of s. 10 (5A) which had become an integral part of the Act, lent no support to the plea that by a legal fiction the compensation must be deemed to have accrued to the assessee in December 1955. The faot that the assessee included the receipt in question in its profit and loss account in the year 1955 was a wholly immaterial circumstances. That circumstance did not afford any basis for the argument that for this particular receipt the assessee adopted a different system of accountancy. Obviously the entry was delayed because of the dispute. What is relevant is the method of accounting and not the actual entries. [125E-G] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1535 of 1968. Appeal by special leave from the judgment and order dated March 1, 1967 of the Bombay High Court in Income-tax Reference No. 52 of 1962. .R. H. Dhebar, J. Ramamurthi and R. N. Sachthey, for the appellant. M. C. Chagla, A. K. Verma, J. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for the respondent. The Judgment of the Court was delivered by I:Iegde, J. In this appeal by special leave, the questions that arise for decision relate to the taxability under s. 10 A (5A) of the Indian Income-tax Act, 1922 (iii brief 'the Act') of a certain amount received by the assessee firm as compen-sation on the termination of its managing agency. The assessee is a Private Limited Company and at the relevant time, it was under voluntary liquidation. lt was B incorporated in June 1945 by converting an erstwhile partnership firm into a Private Limited Company. The partnership firm had entered into a managing agency agreement on June 15, 1933 with a Public Limited Company called ''The Century Spinning and Manufacturing Co. Ltd.'' Under the said agreement, the assessee was to c continue as managing agents for a minimum period of 2 I years and thereafter until thaf firm chose to resign its office or is removed from office by the managed company. Durif!g the period of 21 years stipulated in the agreement, the managed company had no right to remove the managing firm from its office except for reasons mentioned in the D agreement. During the period the assessee continued to act as the managing agents the agreement provided, that the managing agents will get a minimum remuneration of Rs. 6,000!- a month and if its remuneration is found at the close of the year to be less than 10 per cent of the gross profit of the company, the managing agents were to be E paid a further additional sum to make the aggregate re-muneration received by it equal to IO percent of the gross profit of the company for that year. The agreement further provided that if the managing agents' services were termi-nated before the period of 21 years stipulated in the agree-F ment except for reasons mentioned in clause 15 of the agreement the managing agents would be entitled to receive from the managed company as compensation or liquidated damages for the loss of office the sum mentioned in clause 14 of the agreement. fn about April 1951, a large holding of the managed au|, afearal a fratfedt & aaah at setters aed au gm cam ay fratfedt &TITae F Gaael aeara at tan FR eT FT yey can a afenfes wt faa|Ue area eatHIT BT att wefe fasted agar Sear aifufear Far csfa ®AZANT Vag aTaraet ahead % amet faaifedt & az cetia Ft fe seanaafta oe Frater ae 1956-57 F at add amar ot azar) feeq at atawut ot, ofaawa tag afafaaifa fear fe aradi ® aed abe ofefeafaal% frat a 23 ade, 1951 a seava fare ated al War at att saere se It faatem ag 1956-57Fae adi arm ar azar| Ugh Amde ot afew § afafran at are 66(1) Barta fafe B farafafaaat S84 eq Maa ay ua H fac FRX 1. Far ea ara & aeal ateafefeafaat F yaeq afaacewares gt at F Frey faatfedt at ofrre 23 aia, 1951 a Mezaat mar at? 2. aT ea mA HFazal aleofefeafaat F 234,000 weak armaae A Sa Te eae HIRATA aiaHT afafa, 1922 a are 10(57)& aediat faatea ay 1956-57 F wutg ar ?6, Set aaTaT A Tea Tea BT GT aH feat ate gat sea aTSAT A THT feat: 2,34,000 ark at ofarne at cae aearfaarhta aaart fag afafiar aare 10(s¢) & ate ara at can frefzerat 1956-57 # auras geil 1 ea fafavag a cafes ghax araax aram, yeasANT tT ae wa aT 2| 7. BF Tat sa set ot faa HUH fH agr ga ares at afefeafaat sizcreat & arert gt sara afew & aaa weaarefraifedd at gfsax23 A974, 1951 BY MTT gat ea wear at Gat gar afasat ate waheraerqay & ata feo me wut F fast ® areafan sara gz afd= 1 Sa artH arg faare adt @ fe sara oface ar aaca fear mar HUT Rave 15at ofefa # dt arar frat ag soafaa 2 fe afe tet arf sail afar fresysaat a aque adt 8 at saa afenat weqtt Bo afewatal Fog at erfa atrt & Brad Sars ofaae sea wey sr gware al star| yg tqse 2 fesafera arodt & faeg faathedt & ot are arse fear ar sad seq eqrarag 32aw agt aa ararar ar fe Hue H @vs 14H ala athe ofa wea w7aHl HAUT J LTA qs Hag srafeaa 3 fe— carga & afrnat & oe 8 faa sa arealar agal eM eafawat & ave 15H fafafece &, Peet ai aea wre ar agaoa ® afag&fay art fay seat al ar & fanz a ay ar tat ofefayifea fates warea geet ga at & ate ays a gz 6,000 Aa areal wae arfa aBy a ga aay ifaw aaa at defer wee H aia fafan grarz ait A we seat 8 21 ag at ararafa H fae ak vat 21 avataratata & arqet aaafea werfay orea at at amare eel afaBH A BH Ua oaafaa a aT ag Tat’ 8. saftaa weal ® faeg faalfedt sre area fee ae ara A,qararet& dig F uaara dfaare ag ar fe aar ga aos wt HUT H avs (0 Fayq@t stat alfga feat sarq ofaau wut F Ta wa H aus wasgfuaaiay at ciferfas & dara ar saaea fear war 2 ar aaa sfaat GUT wT& aes 14% ara ot waarfed fear ara arfzc, faatfeal A ag cata at fHaug # fafgcz 6,000 aaa at uifa fas eqaan ufa 3 farg areafsa sfaazavg 10% gaafeaa Ofa & aaarfea fear ara afm| sea eaaTAT A agacta argat at dt sea eqrarag & aarqart aus 14 8 sara afaaatat ataqfaa eq & aad ang HAT VA are qr F ara sr et saa eTfeat war ar farg gat sa qaardt at at aqaea fear vat ar frat fag asmart F| VaR warqart sa aus Ha qrardt ar afeara afua ar Piafac yay afanat exert Y1 saa ae wa eaaafeat fH favtfedt wa atd2q qrarty offaatfer qeardt1 sea earmaa A ag ate afafaaticafeat fa ‘6,000 ea & aga’ Ta aT ay 6,000 eae wt fafeaa tifa 4,7 gaaam at a saa afae| ga ae FH sea eqraT a Gna aTAAT ys ZA Waaqa wy & aga 21 HUT ae 14 wT aT A ag eee J fe va aus H Talafratfed ox fafeaa cfs % fa gmare ari gat meatAH ag ofefraifeagaara & faw ener ati aa: ea aga fafese fa aE sam oat Bt aTaTSeq TAT are feu mT sat a Tana zt 9, va an facta seq ot fase Bet| caer AY TAL are 10(5q) *yateara ot waafeaa 2| gaa ea Va UIaea BT ATA ada SoTT H fagsawn faeait ae eratua fear 81 ga are Haze eq c aie feage”(sites ar sica aaa) mez IT St aarTFH areFH A seq dag sata(1)ateq dara ate (2) sea darai arfnfsas aarsaia FH Tee sq" (ateaziz) oe eqra fear qrat 2 wate ane Farsafa A Faq Aca frags”(aca aarat)at@& araat a ard 31alfaisas aarigia a feaaaufaat sta awa ar sae aaa ww ¥ afar h ofan F weyala & arate at iad sfafce at cafa ara A arg sal 21 gah farda azwarrata & areafaa siftaay ar dfaacat ax gt vara fear arar g | G company was acquired by a group of shareholders who were hostile to the managing agents. Thereafter the relationship between the managing agents and the managed company became strained. On April 23, 1951, the Direc-tors of the managed company passed a resolution termina-ting the services of the assessee firm as managing agents. H This resolution was affirmed by the shareholders at their extraordinary general meeting held on May 23, 1951. In 9-Ml245 SupCl'71 pursuance of the resolution, the Board ofDirectors on April 23, 19Sl, a notice of termination of the managing ~gency was issued to the managing agents. In reply the as~ssee claimed compensation of Rs. SO lacs for the unlawful termination of its services. But the managed company was prepared to pay Rs. 2,34,000/- as compensation calcu-8 Jating the compensation at Rs. 6,000/- a month for the unexpired period of the agency i.e. 3 years 2 ·months and 7 days and Rs. 4600/- as remuneration for the 23 days of April 19Sl. The assessee refused to accept that amount. Thereafter the assessee sued the managed company on the original side of the Bombay High Court claiming c a sum of Rs. 28 lakhs as compensation for the unlawful termination of its services. The managed company resisted that suit. The suit was decreed on November 17, 19S5 in the sum of Rs. 2,34,000/- and that decree was affirmed in appeal. The trial judge as well as the appellate Bench held that under the terms of the agreement the assessee :0 was only entitled to liquidated damages at the rate of Rs. 6,000/- per month for the unexpired term of its agency. The assessee received the amount decreed in December, 19SS. Till the insertion of s. 10 (SA) into the Act by the Finance Act of 19SS (Act lS of 19SS), compensation re-ceived by a managing agent for the termination of his agency was considered as a capital receipt, but s. 10 (SA) provided that any compensation or other payment due to or received by a managing agent of an Indian Company at or in connection with the termination or modification of F his managing agency agreement with the company shall be deemed to be profits and gains of a business carried on by the managing agent, and shall be liable to tax accordingly. This provision is not retrospective in operation. As seen earlier, the compensation with which we are concerned in this case was received by assessee in December, 19SS. In the assessment year 19S6-S7, the Income-tax Officer overruling the objections of the assessee included the said amount as the profits of the business of the assessee during the previous year. Admittedly the assessee main-tained its accounts according to mercantile system of H accountancy. The assessee's contention before the Income-tax Officer that the receipt in question cannot be brought A to tax in the assessment year 19S6-S7 as it became due in 19S 1 was rejected by the Income-tax Officer. In appeal the Appellate Assistant Commissioner agreed with the view taken by the Income-tax Officer. He opined that the amount became due to the assessee only when it was de-B creed by the High Court on November 17, 19SS and there-fore it was assessable in the assessment year 19S6-S7. But on a further appeal, the Tribunal held that on the facts and in the circumstances of the case, the compensation in question became due to the assessee on April 23, 1951 and therefore it could not be brought to tax in the assessment C year 19S6-S7. At the instance of the Commissioner, the Tribunal submitted under s. 66 (1) of the Act, the following two questions of law for the opinion of the High Court : "!. Whether on the facts and in the circumstances of this case the compensation for termination of the managing agency accrued to the assessee on 23rd April 19Sl? 2. Whether on the facts and in the circumstances of this case the compensation of Rs. 2,34,000/-and interest thereon was taxable under s. 10 (SA) of the Indian Income-tax Act, in the E assessment year 19S6-S7 ?" 10. Tae gua az frond frarar 2 fe ga areafara sfaane & ea argad gag aya, 1951 8 faatfedt wy mem st mar ar gaia ag faaifedt wl) areca afaaraz, 1955 # grea gar ari wa sea as ysat e fH are10(5a) A “atsa (ater)” afuerfac fra afefeafa F ary alat gate saa ‘featqe’(area)atuenfed fea afefeafaat F arg aide?saat omgs ad ad si gard aaa fafa Fo at ofaeaferat arta &1 ga fafa 3 fasifed ay afaqemat & gerd oral Garcafa aqart at eae 8 ate ete arafad sar—aifaer ga rarrafa & aaafea fear seat 3 ot az ararar & 1 gat weal F Ofafran & afqfsan tar-cafs ar ase Sar-caft et aqary at sorsta at TE@ WT Tas aver wIaTg TE cals Femac ae gt saat faster fear awaarfag 1 ga arae H sa fram} rare ot faare wear mraeae ay 81 aii.ofafiae & aq soaeedtary are 10 (5a) at cea gearafe ea qaHIK"wfTel aI, at ag easeg fe se are H aay ‘at Meg’ (sq z)az oa fauifefaat free azar g at atfufsan Har-aafa & agqare agar Far cad 2 siteA‘fedlas arg’grer seq’ a2 ga fratfefeat at aly slat @ Tt wae Mar-cTelsATT Ft TAT La ear H MKT eTART ARTA TATA Yo TBafa TIE (1)art aaaaa saaa fear ar—| BUOma ME aaa afrard fret fase ara a fratem # afeafaa Bl KGa SAT ZIT Ja aga aig B ae aval Fara-ara X atmeat gaat arfay, wate (1) fratfeata stadt Sarcafa agar ewe(2) afe tat cafe afufsas Sar-cefa & a aa aA ate sraeatweg, Wear Hwa ar afsare He maya gut? afe ag ga fasag qxagaar & fs fraffedt at ar afeare feet fafase Far ad Ft NeraOT SENT gar at sa oe ara al vaeadt fratea ag A afeafar azBar arfga v” met At eH, Sa Tea Te era tad au fH faatfedt arar avardt a€ Fearsafaatfaisaa varcefa 3, ga sq er gat tat 2 fe faalfedt at ofan orcaHt BI AfTHIT FT VEYT EAT ST as sea at afafaaifer Hr gt @ fa ag ay by «= MSA, 1951 FH BEAT ga ae| 11. fawrt at az Fag acta A we fe dfH fratfeat & sfaaz a«Sa Arar BY araa, frat fare aa eHare ar, faare garat 2, at ae afafratfeaBrat afeg fe sa UHH TreT HUA HT AfTAIT aa VAT SA Ta SIT aTATATT4 oa faare ar aaarea Hx feargu ga acta al aa aal AIA BHA| Fargaa afud fear ware aoat Barat a fafa-faeg wr & aarca at ® facSfaat ster ay at fraifedt ar afrare ate sfaat at ag arat frat facoag gwarcd, wae FH aque wT a afaa@1 fratfeat ate sara at oA arealara & dah faare FH seq eqraray A wt tar dt afufaetfa fear arsga deg & fa fratfedt tel weafes ofa ar arar Bt xar ot, faa fac agShare ae at, Gast afasre aarfaa afeare H arafeafaa sat st area [1971] 3 eo fre To AAMT BizAT WS RETA FATT MART MAI, Agra (1) aT ais A astaseq earatay a ag afafaaifca fear fe set sara afanat sau afarHut H fraeaal FR aaa ara Sana afer ary Fa up fafsaa sfanae arare gt qfwafas F fag snare 3, agi waea afaaat al aaa oivatasaa squat alat2 aa feel ag % fag areal tag ara afufafeaa ax facara §1 Hay sa aea ara a fe weqal atx gaea afasal & dra h fearsHIT BETH Y TIA Baral A vaegq afssal wt mer gifeafas war azy far@, vary afaaat Sa ava wr atat ww e far swax agtat area fH 3ameq aifwafaa Naat aa gar ar alt sa qt da aw araar ofufsaiicawal far arar aifge wa aa fe aeqay A Za wiey aAliga at cHaafzgaaq ofwafaa at sah wal Ho ant agy wx faqrdi ea va fafayag &fafautarart@ agua & wit ag fafaataran<t seqa wae F azat at aTatat&1 The High Court answered the first question in the affirmative and the second question as follows : The amount of compensation of Rs. 2,34,000/- 11·ill not F be liable to tax, but the amount of interest thereon will be taxable under s. 10 (SA) in the assessment year 19S6-S7 Aggrieved by that decision, the Commissioner of Income-tax, Bombay City has brought this appeal. We shall first address ourselves to the question as to G whether on the facts and in the circumstances of this case, the compensation for termination of the managing agency accrued to the assessee on April 23, 19Sl? The answer to this question depends upon the true effect of the terms of the agreement between the managing agents and the ma-naged company. There is no dispute that the termination H of the managing agency did not fall within the scope of clause 1 S of the agreement which provides that the managing agent shall not be entitled to receive from the company any compensation for the loss of the office of Agents to the company if such loss arises from any of the causes mentioned therein. It is c:lear-that was also the view taken by the High Court in the suit filed by the assessee against the managed company-that the assessee was entitled to get compensation under clause 14 of the agree-ment. That clause provides : "In case the firm shall be deprived of the office of Agents of the company for any reason or cause other than or except those reasons or causes specified in clause fifteen of these presents the firm shall be entitled to receive from the Company as compensation or liquidated damages for the loss of such appointment a sum equal to the aggregate amount of the monthly salary of not less than Rupees six thousand which the Firm would have been entitled to receive from the company for and during the whole of the then unexpired portion of the said period of twentyone years if the said Agency of the FiTm had not been determined." In the suit filed by the assessee against the 'managed company, the only controversy between the parties was whether that clause should be read alongwith clause IO of the agreement which provided for the payment of re-muneration to the managing agents during the continuance of the Managing agency agreement or whether the com-F pensation payable should be determined solely on the basis of clause 14. Replying on the expression "not less than Rs. 6000/-" in clause 14, the assessee contended that Rs. 6,000/- referred to in the clause is merely the minimum but the actual comnensation should be determined in the manner provided in clause 10. The High Court rejected G that contention. According to the High Court clause 14 not only provided for the payment of damages for improper termination of the services of the managing agents but it also stipulated the damages to which they were entitled to. In its opinion that clause had quantified the damages to which the managing agents were entitled to. It opined H that the damages payable to the assessee firm were liqui-dated damages. The High Court further held that the A ' expression "not less than Rs. 6,000/-" means a definite sum of Rs. 6,000(-, neither more nor less. We are in entire agreement with the view taken by the High Court in that suit. It is plain from the language of clause 14 of the :agreement that the assessee was entitled to a definite sum 8 [under tnat clause. ][In ][other words it ][was ][entitled to liqui-]dated damages.. Hence we agree wi~h the answer given by the High Oou!t to the first question referred to earlier.