M/S. Chidambaram Mulraj & Co. Pvt. Ltd v. Commissioner Of Income Tax, Bombay City I

M/S. CHJD~MBARAM MULRAJ & CO. PVT-. LTD. \.' .. COMMISSIONER OF INCOME TAX, BOMBAY CITY I N 01•ember 21, 197 5 'I• (V. R. KRISHNA IYER AND A. C. GUPTA, JJ.] Indian Income Tax Act, 1922-Sub-s. SA of s. 10 introduced by the Finance Act of 1955-Interpretation of-Compensation paid fdr the terminotion of a managing busi11e:u is a payment in relation to the said busi11ess-Previous year relevant to that receipt is the same as the previous year for the managing agency business itself. . The assessee-appellant received in October, 1953, a sum of Rs. 9,95,000/-out of Rs. 10,00,000 /- compensation for the premature termination of its manag-ing agency business, a sum of Rs. 5,000/-, having been deducted towards broke-rage. The said amount was credited to the Capital Reserve Account in its books for the year ending on June 30, 1954 described as "compensation for Joss of office". In the assessment year 1955-56, for which the appellant's previous year ended on June 30, 1954, the Income Tax Officer assessed the entire amount of Rs. I 0,00,000/ - in the hands of the appellant company under s. 10 (5A). The Company preferred an aPPeal to the Appellate Assistant Commissioner who allowed the appeal holding that (i) s. 10(5A) created a new source of income for which the previous year was not the previous year for. the managing agency busines. ending on June 30, 1954; (ii) the compensation of Rs. 10,00,000/-whichi the assessee received in October, 1953 fell in the financial year 19·53-54 which would be the previous year for this income for which the assessment year was 1954-55, which was before the enactment of.sub-section 5A of s. JO; (iii) the fact that the appellant had entered the amount in its books for the year that ended on June 30, 1954. could not be taken as an exercise of option by the assessee, accepting the said year as the previous year in respect of the receipt; and (iv) if at ali the amount was taxable in the assessment year 1955-56, the assessee was entitled to a deduction of Rs. 6,00,000 /- paid for acquiring the managing agency. The appeal preferred by the Department was partly allowed. The Tribunal agreed with the Appellate Assistant Commissioner that the assessee was entitled to a deduction of Rs. 6,00,000/ .. which the assessee had paid for acquiring the managing agency busiiress. The Tribunal however held that Sec. 10 (5A) does not increase a fresh source of income that since the amount in question was received in the accounting year relevant to the assessment year 1955-56, it was taX'able in the assessment ye<!r 1955-56. The High Cm1rt on a reference under s. 66 (1) of the Act on the two questions namely, (i) Whether the sum of Rs. 10 Iakhs is income assessable in the year 1955-56 by virtue of Section 10(5A) ? and (ii) If the answer is in the affirmative,· whether the initial cost of acquisition of the Managing Agency of: Rs. 6 Iakhs and Rs. 5 thousands paid as brokerage on sale are deductible ? agreed with the views of the Tribunal. On appeal by certificate under s. 66A(2) and dismissing the appeal, the Court, HELD: ~I) Since; sub;s~ctiory 5A of s. 10 came into f?rce on April 1, 1955, the amount m question 1f received by the assessee durmg ~the previous year for the assessment year 1955-56, would be taxable under that sub-section. BY 8-L159SCJ ji6 [1976J 2 ·s.C.R. Had faarara AazIT Woe Heat sigaz fafazs— AUTHT WAIT,AETS WET-1(M/s. Chidambaram Mulraj and Co. Pvt. Ltd. The Commissioner of Income-tax, Bombay City-1)(21 4arax, 1975) (Fate ao MIRo Fo eqeate To Ato arat) efesaq gona faq Gaz,1922 (1922#111)——eret10(5-)—-sarxafamef &gzaetTa——saeafawen & ang a gee ara ga at sfaae ser weasfaee at cat et ofa ate 30 Ha, 1954 a earatt aret ag B aral X vastwat--1 asa,1955 aarr10 A gaara (5-0) st WET atatl——gaaq| qT& meta qaitta ofaataede gaat sat—sofer aatt saroafeaeaIzaitAtatl—--Tatoonfta,fretaq attcata ata &g§aa adt aadt srnt—state (5-¢)& afefraat a aia Ran gaat aarm wen fe saesre gH Ua we at eqazem atwi frad atefta Gat ofa at wea aaa faarsne ate saGt HC Gatata feat at ae| adtarat un side arqdt&1 ga aradh F 1944 4%6 re Raat Hew fer ar caer afar (Fafa Caer)ada att sarerarett weqtt ® aq 17 at ® far ws garmeer afeacr Hue fearatt ata adtardt seat * 10 meaaa & sfaat F sfana F fac xara afaacon were fear|gatata, atta? aecdt F 10,00,000 eat % sfanc Faxsary BHT wlts By at Tega edlare Hr at athe ya31 M of Law/76—6 9: Seater arraFrorerreta afarat 60 afaaat ® eq F gear He fearwitaref wt vitae F ET% 9,95,000 waa at ata sma ge att 5,000 wa aT UiT_ caret % wT A cater FT A THa ule set gE AE 30 4,1954 a sara ga ae at F atari F aral A “qeFFalfa & fou sfaex” & er H war at TE1 wee AfaardaFTamaaa 10,00,000 (ait) & a1 amar 1 arHt orrat Varsta ofaardt fear & arte1 wiraret H favs siteF aerasatiatta wax ge ruser faart + age aad (Aare)* gan % fase afsecn F ane attr ati aferat aeafafaattcr feat fa fratfedt Faq 3,95,000et FT UTIKar aa h afea F met si gaanH wea ox alana 4gaa ravavay#& amet ae wea fafece far fH wat 10,00,000era at uf ae 10(5-0) & ararea at 1955-564 faaiaara 2) ose savas & ga gea at fia faaifedt & oer8frat 1 aa faatfedt & sarnga Fae sea vaaraa are fag aysat aH qa 2a F faa soaaa rararaa A ate Bh aleATAAT BUA BY, afafaatfta—scera(5-0)& faa werat at aaeer& ag wer,gaittamfta (sfter fedte)at ar aaadtSyadtardt at sea caeat dara, caer apasy FTeATKat aarfta & fare fear var dara ar ate ca sare ate ff Fasiftadt 2 at fe araca cao we gal at Feat aia, sae FH aT afieen a1ag Feat aa faeseg FT eas AATH adt feat war ot, feeg ag at ease % fe ga ofr ar ateyaa afaacy areaTe gt at gafae ag adt wer aT aaafe ae sift fadt au ate cara ataa ee at| waa (5c)gfafaafad eat aaa, faarravea aT cata Hag ga ara FT AIXgt fe un ca we atsoarg feat ore fas welt soft,wt waa aaa at we ot, at H mera are oT ah, arfzaara a aie aa va afer ara(sits apa) F fou feetau ata at aoa fear amet fret saraafsacr arcane atwart: ox feat war sfanx, Tat FTMAIKFH Brara F Garyz farateaey HATH We RETA To ATTHC ATT, TAG [PAto TT]61 ait zafae ga ofa ® fac gana dat at ai a re afaReHTLATe BT YF TM att (FT 6):fatace frrora [1967](1967) 65 ATR0 eto MIto 50:MaKe WT, AASFATT AT Tal ATs Ato (The Commissioner of Income-tax, Bombay Vs.Sir Chunnilal B. Mehta. & Sons Private Ltd.);6 [1963] (1963) 48 8Tfo zo WIXo 661: MIQo ato Marfa aITg WE Het TATA AIR ATR, BLT WIT Tlaraez(R. V. Lakshmiah Naidu and Co. Vs. The Com-missionerofIncome-tax,Keralaand;Coimbatore) ..6 fafaa adie afretfcat: 1971 at fafat wdtt Fe 360. 1961 % arrac fata de75 H rae Veaarta27/29 wat,1965 ata fata wie aed % fangat Ee wile||: gitar BMT Ak..HAG Fo Alo Marat Tes Heqatmaaat RITA.sft Udo WoAIT|arora at facia earatfarafa[To dto][ Tea A][ feat]th varanferata Watt7 adit wa weae arerdti fate ay1955-56z%fagnaa qdat av, 30 GA, 1954 at arg at mata.airareét aertt & smart,eat Hwa,sahHerq [1976] 4 THe Fito qo Section: CONCLUSION a' legal fiction introduced by the sub-section, any amount rece_ived by a manag-ing agent as compensation for the termination _of his '!1an':'gmg agency agre~: ment which would otherwise h~ve been a capital rece1J?t i_s to be deemed. as profits and gains of a business carried on by the managing agenL Tbe fiction regards the capital receipt as income and does not extend to trealmf? the termi-nation of managing agency itself as a business. The am01.~nt received by_ the appellant was the payment for the termination of tile ma·nagmg agency busmc55 and as such, the receipt is obviously related to that busmess. Though_ the am~uot was not earned in cauying on· the busines~ of ~anagn:~g _agency, yet th~ source of the receipt was tJ)e managing agency business itsel~, 11 Is not therefo1 c·orrect to say thar the receipt was income from a new and independent source. . ·· [777B, PG] (2) The High Court was right in ~aiding _that in enacting sub-section SA, the Legislature was concerned only with providmg a head under which the receipt which has been d_eemed to be income could be bro~ght to tax and was not concerned with creatmg a new source for that deemed mcome. [777GJ (3) The compensation paid for the termination of a managing agency busi-ness is a payment in relation to . the said business and, there~ore, the previous year relevant to that receipt would be the same as the previous year for the managing agency business itself. [778A] Commissioner of Income Tax, Bombay v. Sir Chunilal V. Mehta & Sons Private Ltd., (1967) 65 J.T.R. 50; and R. V. Lakshmiah Naidu and Co. v. Cnmmissi'oner of Income Tax, Kera/a and Coimbc~ore, ( 1963) 48 I.T.R. 661, relied on. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 360 of 1971. From the Judgment and Order _dated lhe 27/29-1-1965 of the B9mbay High Court in Income Tax Reference No. 75 of 1961. S. C. Manchanda, K. J .. John and J. B. Dadachanji for the Appel-!ant. S. T. Desai, Girish Chandra and M. N. Shroff for the Respondent. The Judgment of the Court was delivered by GUPTA, J. The appellant is a private limited company. The assessment year is 1955-56 for which the relevant previous year ended F on June 30, 1954. The shareholders of the appellant company arc Mulraj Kersondas, members of his family, allied concerns and nomi-nees only. ln 1944 the appellant purchased the managing agency of the Elphinstoa Spinning and Weaving Mills Ltd. for Rupees six lakhs and thereafter entered into a separate man-aging agency agreement with the man::ged c9mpany for a period of seventeen years. The appellant's only source of income was this managing agency in the G relevant year. Mulraj and his group also held among themselves 25,000 ordinary and 10,000 preference shares of the Elphinston Spin-ning and Weaving Mills Ltd. Mulraj entered into an agreement for sale of these shares with K. D. Jalan of Calcutta for a consideration of Rupees forty-five lakhs; one of the terms of the agreement was that Mulraj would have the managing agency of the appcllant company terminated. In implementation of this agreement Mulraj wrote to H the appellanl company on October 21, 1953 asking the company to give up the managing agency on receipt of a sum of Rupees ten lakhs as compensation which he promised to pay. On the same day the appellant company passed a resolution accepting Mulraj's offer and * Ue, rae wate (wage weaed) ate arafadfadd ara@!1944 # attest % 600,000wat FX wafereerfeafaruss atat faer fafats ar sara afeaco (aafar oid)qa at vat ae carats aerdt & arr 17 ay st wate& faq ca gaa saer ofraer sere frorfes farva garay H adtearett at arr ar cnata aaa wat sara afroaT| ae A Tahat F ora, Cafaeer fectwos afarfren fafats % 25,000 aTaet at 10,000 mfATa ie (BHAwae) TA | HIT AHAHATRH Fo Mo aA F aagat aa® 45,00,000wat & sfana & faa fasa at were facrfacaaafeat| eae at cH frat ag a fe otal weetF racerBt ATT GT HT BTL ATTAJF GA PTT aTTat Sta Ffar21Wagar,1953 at adtardl weaal ca frat fe ag sfaax & wa F ca oe eat al Ufa aax,frat et at ag aaa @at 8, sara afaeen aT ols 21 vatfer adtteret wert a we dag ofea fear, fara are saaryas at Crag AAat ak, sara afeaaial & wr taqe a wrtqa eagu, saeraeita aeqdl cafineca fertaauss aifay face fafaes at um ca feataca ana ataqt eatery He fra war aR 5,000 wt qawsy areatae ey a up cafes dterara anata at far at ae a safaggaa ofuacnat ana a aeax aartaFofaac Fey Ffaata Herastcat FT 9,95,000aaa at Ufa es Al Ht Ha aregs Fe 30 WA,1954 FT aaa AA aa ay F attaral Fara Foe at aft & fae sfane” & er A qsitre arefazawat (after ford varsvz) ara war ae et as 2. faatet ag1955-56 4, freadarae adtaratatqa at 30 FA, 1954 wt AAT EMT, AaHe Afaard a, adtareitarrdtFT ITT10,00,000wa al HA THA Ie seHa caytae, 1922.at art 10(5-0)&aela, frat ae fearapadaewaz, 1922af art 10(1) a aesoatead3 fe“fratfedtartwareaefretareas,aft at faereaee FATT Ws ETT go HTTRT HTT, HTS 6 3 aaa& ara at afwara oy, ‘areny, afa at aaaaR aftara’ wate F sia, fadd ft feather ar ag ax aaaerr r’* gqeret (5-¢) fra afafiaa i955 ert artio #1 894, 1955 & waar at Te at freer gaa ATT ZaTHK g-- (t) aeqdt & ary waa ware afarHeewari ar sareeoe aT sae aracaFf ferctarea aeey A gar afrpal ay; (ft) wat ce ayaarfta a waa wagfrat ote wat® SRTgt aT sah aeaaF,fet aredta aeodt & saree ay; (at) amtceatanrtaat gaat arafraeaatar aah F saraqe at gah rare F,wuaa uUsadat F fedt oa aed & ara ararea: AT wa aT gary HU aT Tara aTfret oafsa ai, ae fax va go at wer Hav aT;* sae Fae ga sar 2—| “The tax shall be payable by an assessee under thehead‘Profits and Gains of business, professions, or vo-cation’ in respect of the profit or gains of any business,profession or vocation carried on by him”. T“(SA) Any compensation of other payment duetoorreceivedby,— (a) a managing agent of an Indian company ator in connection with the termination or modificationof his managing agency agreement with the company; (b) a manager of an Indian company at or inconnection with the termination of his office or mo-dification of the terms and conditions relating thereto; _(c) any person, by whatever name called, mana--ging the whole or substantially the whole affairs ofany other company in the taxableterritories, at or inconnection with the termination of his office or themodification of the terms and conditionsrelatingthereto;— 64 - Seater marae faore afer [1976] 4 3a fro To (3) wet afar at aati aT sae TS faaerat vic aatFH GIT TT AT TAH ray%, frat wer cafer B® ardarc avraell erat H faveamt at aaa, waa aal #, afaecrwat aafret ooferat, we fera Ho At Het TTaTaAt,aitea at wae ara sra feet at ofaee at wea aaaat aarfera,vaca afanal, wacan at wer onfed eteaa ae feat areare ar ara aie afaeayTART ATCTait at h fae ag aaqare aTfacarefta start" wrote to the managed company, Elphinston Spinning and Weaving Mills Ltd., tendering resigm,tion of its office as managing agents. The resignation was in due course accepted. The assessee received from Mulraj a sum cof Rs. 9,95-,000/- as compensation for premature ter-mination of the managing agency, Rs. 5,000/- having been paid by ....... Mulraj as brokerage to one Dhirajlal Maganlal. The amouncreceived ' was credited to the Capital Reserve Account in the appellant's books for the year ending on June 30, 1954 described as "compensation for loss of -office". In ·the··assessment year 1955-56 for which the appellant's pre-vious year ended on )unc 30, 1954, the Income-tax Officer assessed the entire amount of Rupees ten lakhs in the hands of the appellant • company unde; section 10(5A) of the Income-Tax Act, 1922. Sec-tion IO(J) of the Income-Tax Act, 1922 states that the "tax shall be c -payable by -an assessee under the head "Profits and gains of business, profession or vocation" in respect of the profit or gains of any busi-ness, profession or vocation carried on by him." Sub-section (SA) was inserted in section 10 by the Finance Act, 1955 with effect from April 1, 1955, the relevant part of which is in these terms: "(SA) Any compensation or other payment due to or received by,- (b) a manager of an Indian company at or in connec-tion with the termination of his office or modifica-tion of the terms and conditions relating th6reto; (c) any person, by whatever name called, ma.naging the whole or substantially the whole affairs of any other company in the taxable territories, at or in connee--tion with the termination of his office or the modifi-cation of the terms and conditions relating thereto; (d) any person, by whatever name called, holding an agency in the t•axable territories for any part of the activities relating to the business of any other person, at or in connection with the termination of his agency or the modification of the terms and condi-tie>nt. relating thereto; shaJl be deemed to be profits and gains of a business carried on by the managing agent, manager or other person, as the case may be, and shall be liable to tax accordingly;" The company preferred an appeal to the Appellate Ass!stant Commissioner against the order of the Income-tax Officer. The Appellate Assistant Commissioner allowed the appeal holding that H section 10(5A) created a new source of income for which the pre-vious . year was not the previous year for the managing agency busi-ness which ended on June 30, 1954, that the compensation of Rupees 64 3.errayFX mrrae Bfsarey F aren F fate aerTHamaaa (adit) & erat ada atagree aad (att) 4mitt at ag afafraifer aca ge dae fratfe amet 10( 5)y are at aat Ma afaa fear or, fraat qa ad sara afTHTTBrae at gd ad adl a, ST 30 Fa, 1954 FT Tartgatwie ae FR 10,00,000erat at Sfaae, aT adtaTat A wagae,1953 % wre far, facta at 1953-54 # feata F aT aToT aq ara % far gd ad dim, faaat Prater ay 1954-55at, at art 10 at grarer (5-0) & afafraat J ssa st ara gnicaaa at fe attardtA age wR va atTa A aat di ot 30:94, 1954 at aaa gar, frathalara wTtar gata adl amar orem fae ert va a ve Te Farray Hvar ad al yd at H wo HR efare fear atl aarasaaa (atta) 3 ant aaat ag afafatfea feat fe afcae uta fraterad 1955-56 H feet sare wt wear at a(d) ainy person, by whatever name called, holdingan agency in the taxable territories for any part of theactivities relating to the business of any other personat or in connection with the termination of his agencyor the modification ofthe termsandconditionsrelating thereto; shall be deemed to be profits and gains of a business carriedon by the managing agent, manager or otherperson;as the case may be, and shall be liable to tax accordingly.’ faatfedt sara afaaco ataa wet % fare sar fee aT 6,00,000aya at eetdh ar eHart aT aglaw aTaaa (att) F a AeA& faeg ueea far4 afoacrH atta at1afeaoTat wa ae ot fe art 10( 5) daa va wire aT, TT Tareafaaxat Ft MA SAT A, HTRATT BT ATA AIX AMAA TAHA2 sic yaar até aat aia aft aglseat go ae ais aaaa Hae wan frutor ag 1955-564 ara gad sat TT% ora gg ot, gafae ag we faater at 1955-56 F weetati farg ofrecerA agree ayaa (attr)% ata za ata FHaenfa sae atfa fratfet600,000 waat Hetdt stamart ot, fraat dara ced sar afaaen ata wet % facfrat a ate ag afafratfcraxa ou fa fratfet 3,95,000eaat uf re ae 2a % fae afaeadta at va ata FY are:az ax fear cerartt F wer me afeweT F are 66(1) #aaa faeafafar a set sea arateaa at faface fau—— “(1) wat 10,00,000 wat at ufer, ara 10( 5) % ara 4, 1955-56 & faata are? (2) afe gaat satat A a, a aT yarafaan& asta a orefeaa atta F 600,000 eta Farfaanot caret HoTA war far mT 5,000 ea, Fetalfeu oma aia @?”. qeat set faatfedt B welt oe ate eee uses fawn F FETox faface frat war at sea wapraa & faatfedd at ae echtgediar at dt fe arag uf am ata & ge ara atfreerqd aE 1953-54 at We Tea THT HT TAT at A aT aa Wesfart % cet H fear wet aH Tat TH aT ataea {, Seq PAATATx gaat sat fadifed? ® oer F fear aie afaaen F wren FTaaysa avila aT) #, ae faaifedt 66-U(2)A va Rada vat ayer Tae at sac aA wetATTFl TEseq waaay F gem aH F atacg A feat Ti amr 2(11)4. “qq ag” F at ag at a ofeaar ak vectra sam gaz a tac, gant 1922 wT at zaTHT g—— *"(11) ama, wa aofsera & fat qaaHaraA gg ay’ A_at & ohh({) fra aga ag ard & faq & 31d fraten fea fear aura arat ga 2, aa geae ATA, aT freatfedtare afe saat 31 arda faafeat ardhe at area gat ate ae Harare F aT aEfarerWa Forexfat atta aH TS ae gat fraifedr Ffraax ga fer aera at arat at afasa 25. feras fe sam art za sare w awe)”(5)Sar fe age aarat at aa @, art 10 a sumerfrat1 aia, 1955 at saa eg. cafe, arag wan, afealay 1955-56 % gd at & ctoa fate amr eraarameat, at va sare ® ade wade emit | syeret (5-7)fratgeeaftafaft &sera(ahafart)arrWX, at tet car at, at at sare afereux a amierarewfoae FB wr F feet garr afapat are art at we at,eT aaa ere Fae TA aT eae HF aT afeara &Hoava ara21 aiterdh ar wena@ fe stare (5-0)gesee @ fe za afeaa om(sire gery) aT at aa aara aTmfr SeIt & er ya Fadme afraria: ova 3, 30 aie Gy, afe 1954 der a 8, aura af ae aA “ao Hag ga are 2 “(11) ‘Previous Year’ means in respect of any separatesource of income, profits and gains— A ten lakhs which the appellant received in October, 1953 fell in the financial year 1953-54 which would be the previous year for this income for which the assessment year was 1954-55 w!Jich was before sub-section (SA) of section 10 was enacted, and ti,e fact that the appellant had entered the amount in its books for the year that ended on June 30, 1954 could not be taken as an exercise of option by the ...-"' assessee accepting the said year as the previous year in respect of the B receipt. The Appellate Assistant Commissioner further held that if at all the amount was taxable in the assessment year 1955-56; the assessce was entitled to a deduction of Rupees six lakhs paid for acquiring the managing agency .. The Department took an appeal to the Tribunal against the order of the Appellaie Assistant Commis-" sioner. The Tribunal was of opinion that section 10(5A) only re-gards the compensation received by the managing agent as profits and ., c gains of a business and does not create a fresh source theretor, and as the amount in question in this case was received in the accounting year relevant to the assessment year 1955-56, it was ta¥able in the assessment year 1955-56. The Tribunal however agreed with the Appellate Assistant Commissioner that the assessee was entitled to a deduction of Rupees s.ix lakhs which the assessee had paid for ac-quiring the managing agency, and allowed the appeal partly holding D that the assessee was liable to pay tax on the sum of Rs. 3,95,000/-. At the instance of the parties the Tribunal referred the following two questions to the High Court under section 66(1) : "(i) Whether the sum of Rs. 10 lakhs is income assess-able in the year 1955-56 by virtue of Section 10 (SA)? (ii) If the answer is in the affirmative, whether the initial cost of acquisition of the Managing Agency of Rs. 6 lakhs and Rs. 5000/- piid as brokerage on sale are deductible ?" The first question was referred at the instance of the assessee and the second at the instance of the Department. The High Court over-F ruled the contention of the assessee that the amount in question was income from a new source for which the previous year was 1953-54, and answered the first question in the affirmative and in favour of the I revenue. As regards fhe second question, the High Court answered it in favour of the assei;see and upheld the order of the Tribunal. In the present appeal brought on a certificate under section 66A (2), G the assessee challenges the correctness of the answer given by the High Court to the first qvestion. "Previous year" is defined in section 2 ( 11) of the Act, 1922 and the relevant part of the definition is as follows :- Income-Tax: ( a) the twelve months ending on the 31st day of March next preceding the year for which -the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then at the option of the assessee the year ending on the day to which his accounts have so been made up ;" day(a) The twelve months ending onthe3lst of March next preceding the year for which theassessment is to be made, if accounts of the assesseehavebeen made upto a date within thesaidtwelve months in respect of a year ending onanydate other than the said 31st day of March then atthe option of the assessee the year ending on theday to which his accounts have so been made up.” arat ay at vat ar,wt yar afaact artaaT a aaT ate gt ae arfae arfe wag ofa % avaca F fretted arqa ad qat % far saat fearam dian, afefariaad 1953-54at aad F ek A WTF aeTTA Ge ay aaa aa &, Sarfe at aa ac ah F eq H wer aa@, at ag waa featay1955-56afrazt & wTF HUT A ora siti waa, gaaat saat ofan ae vtaay ara ser watHT zg ay fFate aftersaét at aadl oft, aalfe ag areare dt aara farwT er a attarfaant F ary asaya F aay, TT ETTFmeat& sHe star& fe ag miaaw ak waa ara&gf amF eae amet mt 21woere (5c) 4,wa atal F ara-ary, ag wrafeaa gfe aaa sara afaacyHatara F Pret caer ofraat rer area ars wfane ar wey dara,ware afraat se sae aT feat rear” ar area ale afaaraaAaT WaT| acter at we S fH “areare”gee BR geet “fee”mee F aT Seger at ara& fH ga ara ar avs vt ara,sea afaaer F ara at afes fadt ay wit sam ata >aq Z|fora6. SA Fe cele Tl eatare Hed F srry S| Trae (5a) Fetfe ay sarHerat F ofeacr STH at oaaeat atmar gf aarfta at ag Fe Hera Me at T asitrataat area wifaare srfta (st® wrgaate Hm Fez) al ane 2we| aatareét at sree tee carer afracn FH areare a aia& faq fear mat dare ar wit ga wart case 2 fe sa faeT Urarrvet arate F ara at} facades ae ara at2fe ga wer aT asta sara afeacr FH areare HY Bea A aefeat mat at ferg ag st ere & fe ga orf a ala gardafanen areare ef ati gafac ag adt wer at amar fe aesiicr feat au att cara ata a esati aad wa Fyeaamaray at ag afafaatica peat ste at fe seer (5-t)afafrafaa at aaa faaravea at eat Fag sa ara aat at fe va at at soar feat ore frat adie onfta,of [1976]4 Sao Fro do 68 | ewer aarratrerafrrote afer ma aaa ft we At, HCH ea ars oT as a fH sa ata atfratfortare fa agi sa afera vereétara at (sire ate & gar) at faferaa& fae feedsaa fan ae ata meHT PTA gzwe we,SI UH Mea gree faface’ aa,aeas Aas seq TTT ATaT Galeate BR ato Aga, FATHe so wafrat aae Te Hel TAT AMTHT ATA, Bewae WAC ATA SeeTAT aT ot eT ata fataraat’4 ae afafaatfea fear vat & fe feet cara afsaey HTTaTyat waft ox fear var sfarae, Sat aTTaTK H ataer H AarT gzare gafae va sofa & feu gana ga-ag adt erm at ware4 aa faaq ox faft ar aaa add ea HF feomat Gi ;7, ata want at zg aK at afea ai at airat afer tt 7s t (2) (1967)65 BTRo zto ATT50.(7)(1963)48 HI%o zo AIXo661. As stated already, sub-section (SA) of section 10 came into force <Jn April 1, 19SS. Therefore, the amount, in question, if received by B the assessec during the previous year for the assessment year 19SS-56, would be taxable unc;Ier that sub-section. By a legal fiction intro-duced by sub-section (SA) any amount received by a managing agent as compensation for the termination of his managing agency agree-~ mcnt which would otherwise have _been a capital receipt is to be deemed as profits and gains of a business carried on by the managing c agent. The appellant contends that ·sub-section (SA) indicates that this deemed income is to be treated as receipt from a new source and, that being so, the relevant previous year for this income would not necessarily be the year ending on June 30, 19S4 which was the pre-vious year for the managing agency business, and the assessee should h•ave been given an opportunity to choose the previous year in respect of the receipt in question; if the financial year 19S3-54 is taken as the D previous year for. this income from a new source, the argument pro-ceeds, then the amount would not be taxable in the assessment year 195S-S6. It is further argued that the amount received as compensa-tion could not be profits and gains of the managing agency business because the busine;;s itself was being terminated. The words of the sub-section, according to learned counsel for. the appellant, indicate that the receipt is to be treated as income from a new and independent E source. Sub-section (SA) states, inter alia, that any compensation or other payment received by a managing agent in c_onnection with the termination of his managing agency agreement shall be deemed to be profits and gains of "a business" carried on by the managing agent. The use of the indefinite article before the word 'business', it is submitted, makes it plain that the income is not ~latable to the managing agency business but to a new and separate source. We are unable to accept the contention. The fiction introduced by sub-section (5A) regards the capital re~ipt as income an