{"id":194701,"date":"1954-05-14T00:00:00","date_gmt":"1954-05-13T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954"},"modified":"2016-05-12T21:49:39","modified_gmt":"2016-05-12T16:19:39","slug":"e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954","title":{"rendered":"E. D. Sassoon And Company Ltd vs The Commissioner Of … on 14 May, 1954"},"content":{"rendered":"
Supreme Court of India<\/div>\n
E. D. Sassoon And Company Ltd vs The Commissioner Of … on 14 May, 1954<\/div>\n
Equivalent citations: 1954 AIR 470, \t\t 1955 SCR 599<\/div>\n
Author: N H Bhagwati<\/div>\n
Bench: Bhagwati, Natwarlal H.<\/div>\n
           PETITIONER:\nE.   D. SASSOON AND COMPANY LTD.\n\n\tVs.\n\nRESPONDENT:\nTHE COMMISSIONER OF INCOME-TAX,BOMBAY CITY.(With connected A\n\nDATE OF JUDGMENT:\n14\/05\/1954\n\nBENCH:\nBHAGWATI, NATWARLAL H.\nBENCH:\nBHAGWATI, NATWARLAL H.\nDAS, SUDHI RANJAN\nJAGANNADHADAS, B.\n\nCITATION:\n 1954 AIR  470\t\t  1955 SCR  599\n CITATOR INFO :\n D\t    1960 SC 703\t (3,5)\n R\t    1960 SC1279\t (2,8)\n D\t    1961 SC1007\t (12)\n R\t    1964 SC1653\t (7)\n F\t    1965 SC1343\t (6,8,9,11,12)\n R\t    1967 SC1626\t (5)\n F\t    1977 SC 560\t (7)\n R\t    1986 SC1805\t (5)\n RF\t    1991 SC 513\t (7)\n RF\t    1992 SC1495\t (17)\n\n\nACT:\nIndian\tIncome-tax Act (XI of 1922) s.\t4(1)(a)(b)-\"Income,\"\naccrues arises' is received\"-Meaning of-\"Earned\"-Meaning of-\ns.  10(1)-\"Carried on by him\"-Connotation of-Managing Agency\nAgreement-Transfer   of\t  rights    thereunder-Apportionment\nbetween assignors and assignees.\n\n\n\nHEADNOTE:\nThe  Sassoons had entered into three Managing Agency  agree-\nments  as the Managing Agents of three different  companies.\nThey  transferred  their Managing Agencies  to\tthree  other\ncompanies  by  formal deeds of assignment  and\ttransfer  on\nseveral dates during the accounting year.\nThe  question for determination was whether in\tthe  circum.\nstances\t of  the  case the Managing  Agency  commission\t was\nliable\tto  be apportioned between the\tSassoons  and  their\nrespective  transferees\t in the proportion of  the  services\nrendered  as  Managing\tAgents\tby  each  of  them  for\t the\nrespective portions of the accounting year and the  decision\nturned\tupon the question whether any income had accrued  to\nthe  Sassoons for the purpose of income-tax on the dates  of\nthe  respective\t transfers of the Managing Agencies  to\t the\ntransferees.   Under  clause  2(d) of  the  Managing  Agency\nagreements,  the  commission  to the  Sassoons\tas  Managing\nAgents was to be due to them yearly on the 31st of March  in\neach and every year and was to be payable immediately  after\nthe  annual accounts of the company had been passed  by\t the\nshareholders.\nHeld  per  S.R.\t DAS  and  BHAGWATI  JJ.  (JAGANNADHADAS  J.\ndissenting).answering the question in the negative, that  on\nthe\n41\n314\nconstruction of the Managing Agency agreements, the contract\nof service between the companies and the Managing Agents was\nentire and indivisible, that the remuneration or  commission\nbecame\tdue by the companies to the Managing Agents only  on\nthe completion of a definite period of service and at stated\nintervals, that it was a condition precedent to the recovery\nof  any wages or salary in respect thereof that the  service\nor  duty  should  be completely performed,  that  such\tdebt\nconstituted a debt only at the end of each period of service\nand  that no remuneration or commission was payable  to\t the\nManaging Agents for broken periods.\nThe  Sassoons  had  not earned any  income  for\t the  broken\nperiods nor had any income accrued to them in respect of the\nsame and what they transferred to the transferees under\t the\nrespective deeds of assignment and transfer did not  include\nany  income  which they had earned or had  accrued  to\tthem\nduring\tthe  chargeable\t accounting  period  and  which\t the\ntransferees by virtue of the assignment in their favour were\nin a position to collect.\nThe true test under section 4(1)(a) of the Indian Income-tax\nAct,  for the purpose of ascertaining liability for  income-\ntax  in\t the  case of transfer of  Managing  Agency  is\t not\nwhether\t the transferore and the transferees had worked\t for\nany  particular periods of the year but whether\t any  income\nhad  accrued to the transferors and the\t transferees  within\nthe chargeable accounting period.\nThe word \"profit\" in section 4 of the Indian Income-tax\t Act\nhas  a\twell-defined  legal meaning.   The  term  implies  a\ncomparison  between  the state of business at  two  specific\ndates  usually\tseparated  by an interval of  a\t year.\t The\nfundamental  meaning  is  the amount of\t gain  made  by\t the\nbusiness during the year.\n\"Income\"  connotes a periodical monetary return \"coming\t in\"\nwith  some sort of regularity, or expected  regularity\tfrom\ndefinite sources.  The source is not necessarily expected to\nbe continuously productive but its object is the  production\nof  a  definite return excluding anything in the  nature  of\nwindfall.   The\t word \"income\" clearly implies the  idea  of\nreceipt, actual or constructive.\nThe  words \"accrues\", \"arises\" and \"is received\"  are  three\ndistinct  terms.   The word \"accrues\" conveys  the  distinct\nsense of growing up by way of addition or increase or as  an\naccession  or  advantage connoting the idea of a  growth  or\naccumulation.  The word \"arises\" means comes into  existence\nor  notice  or presents itself and conveys the idea  of\t the\ngrowth\tor  accumulation with a tangible shape so as  to  be\nreceivable.  Both the words \"accrues\" and \" arises\" are used\nin  contradistinction to the word \"receive\" and\t indicate  a\nright to receive income.\nThe  accrual  of  income to an asseseee does  not  mean\t the\nactual\treceipt\t of the same by him and it may\tbe  received\nlater  on . its being ascertained.  The word  \"earned\"\tdoes\nnot  appear  in section 4 of the Income-tax Act but  it\t has\nbeen  very often used in the course of judgments by  learned\nJudges.\t  It conveys the concept of income accruing  to\t the\nassesses,\n315\nPer  JAGANNADHADAS  J.-In the present case the\tprofits\t and\ngains  of  the whole year clearly related  to  the  business\ncarried\t oil  both by the assignor and\tthe  assignee  token\ntogether  and were hence taxable as income accruing to\tboth\nand apportionsble as such between them.\t The phrase \"carried\non  by\thim\" in section 10(1) of the Indian  Income-tax\t Act\nconnotes the fundamental idea of the continuous exercise  of\nan activity as an essential constituent of that which is  to\nproduce\t the taxable income and that the taxable  income  is\nthat  of the 'very assessee or the combination of  assessees\nwhose  continuous activity produces the\t income.   Therefore\nthe  continuous\t and  successive  functioning  by  both\t the\nassignor   and\tthe  assignee  under  the  Managing   Agency\nagreement  was\tthe effective source of the  year's  income.\nThat  income accrued on the completion of the year  and\t was\nthe joint income of both the assignor and the assignee.\t The\nprior  assignments  in the course of the  year\toperated  as\nassignments  of this future right to a share of the  income.\nIt  was only by virtue of inter se arrangement\tbetween\t the\nassignor and the assignee resulting from the transaction  of\nassignment,  that the assignee had the right to collect\t the\nentire\tincome.\t But the share in this income which  accrued\nto  the Sassoons on the completion of the year remained\t the\ntaxable\t income of the Sassoons and they were rightly  taxed\nin respect thereof.\nCase-law discussed.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPFLLATE JURISDICTION: Civil Appeals Nos. 3, 30\t and
\n31 of 1953.\n<\/p>\n
Appeal\tfrom  the Judgment and Order dated the 12th  day  of
\nSeptember,  1951, of the High Court of Judicature at  Bombay
\nin  Income-tax Reference No. 27 of 1951 arising out  of\t the
\norder  dated the 23rd day of November, 1949, of the  Income-
\ntax Appellate Tribunal in Income-tax Appeal No. 122 of 1947-\n<\/p>\n
48.
\nB.J.  M.  Mackenna (D.\tH. Dwarka Das and  Rajinder  Narain,
\nwith him) for the appellant in C. A. No. 3 of 1953.
\nM.C. Setalvad, Attorney-General for India, (G.\tN. Joshi and
\nP. A. Mehta, with him) for the respondent in C. A. No. 3 and
\nfor the appellant in C. A. Nos. 30 and 31.\n<\/p>\n
C.K. Daphtary, Solicitor-General for India, (R.\t J.   Kolah,
\nN.   A.\t Palkhiwala  and  1.  N.  Shroff,  with\t  him)\t for
\ntherespondent in C. A. No. 30, R. J. Kolah, N. A. Palkhiwala
\nand I. N. Shroff for the respondent in\tC.   A. No. 3 1.\n<\/p>\n
316<\/span><\/p>\n
1954.\tMay  14.  The judgment of Das and Bhagwati  JJ.\t was
\ndelivered  by  Bhagwati\t J.  Jagannadhadas  J.\tdelivered  a
\nseparate judgment.\n<\/p>\n
BHAGWATI  J.-These  appeals arise out of two  judgments\t and
\norders\tof  the.   High Court of  Judicature  at  Bombay  in
\nIncome-tax References Nos. 23, 24 and 27 of 1951 made by the
\nIncome-tax  Appellate  Tribunal under section 66(1)  of\t the
\nIndian\tIncome-tax Act and section 21 of the Excess  Profits
\nTax Act.\n<\/p>\n
     E. D. Sassoon and Company Ltd., (hereinafter refered to
\nas the Sassoons) were the Managing Agents of (1)  E.\t  D.
\nSassoon\t United Mills Ltd., under Agreements dated the\t24th
\nFebruary,  1920, and the 2nd October, 1934, (2)\t Elphinstone
\nSpinning and Weaving Mills Company Ltd. under the  Agreement
\ndated  23rd May, 1922, and (3) Apollo Mills Ltd., under\t the
\nAgreement dated the 23rd May, 1922.  The Sassoons agreed  to
\ntransfer  their Managing Agencies of the said  Companies  to
\nMessrs.\t Agarwal and Company, Chidambaram Mulraj and Company
\nLtd., and Rajputana Textile (Agencies) Ltd. respectively  by
\nletters dated the 3rd September, 1943, 16th April, 1943, and
\nthe  27th April, 1943.\tThe consent of the  shareholders  of
\nthe respective companies to the Agreements for transfer\t was
\nduly  obtained\tand the Managing  Agencies  were  ultimately
\ntransferred  to the respective transferees with effect\tfrom
\nthe 1st December, 1943, 1st June, 1943, and 1st July,  1943,
\nrespectively.  The  Sassoons executed in favour\t of  Messrs.
\nAgarwal\t and Company, Chidambarain Mulraj and Company  Ltd.,
\nand  Rajputana\tTextile\t (Agencies) Ltd.,  formal  deeds  of
\nassignment   and  transfer  and\t received  from\t  them\t Rs.
\n57,80,000,  Rs. 12,50,000 and Rs. 6,00,000  respectively  on
\ntransfers   of\t the   Manaoing\t Agencies,   and   the\t net
\nconsideration, viz., Rs. 75,77,693, received by them on such
\ntransfers  was\ttaken  by  them\t to  the  “Capital   Reserve
\nAccount”.   The accounts of the Managing  Agency  commission
\npayable\t by the respective Companies to the Managing  Agents
\nfor the year 1943 were made up in the year 1944 and  Messrs.
\nAgarwal\t and Company received from the E. D. Sassoon  United
\nMills  Ltd., a sum of Rs. 27,94,504, Chidambaram Mulraj\t and
\nCompany Ltd., received from the Elphiiistone Weaving and
\n317<\/span>
\nSpinning  Mills Company Ltd., a sum of Rs. 2,37,602 and\t the
\nRajputana Textile (Agencies) Ltd., received from the  Apollo
\nMills  Ltd.,  a sum of Rs. 3,82,608 as and by  way  of\tsuch
\ncommission.\n<\/p>\n
For   the  assessment  year  1944-45  and   the\t  chargeable
\naccounting  period 1st January, 1943, to the 31st  December,
\n1943,  the  original  income-tax  and  excese  profits\t tax
\nassessments of the Sassoons were made or the 31st May, 1945,
\nat a total income of Rs. 46,48,483.  This income however did
\nnot  include  any  part of the\tManaging  Agency  commission
\nreceived  by  the transferees.\tThe entire  amounts  of\t the
\nManaging Agency commission received by the transferees\twere
\nassessed  by the Income-tax Officer for the assessment\tyear
\n194546\tas the income of the transferees.   The\t transferees
\nappealed   to  the  Appellate  Assistant  Commissioner\t who
\nconfirmed  the orders of the Income-tax Officer.   Wher\t the
\nmatter\twas  taken  in further appeal  to  the\tIncome.\t tax
\nAppellate Tribunal, the Tribunal by its order dated the 28th
\nDecember, 1949, accepted the trans. ferees’ contention\tthat
\nthe  Managing Agency commission received by them  should  be
\napportioned  on\t a proportionate basis and  the\t transferees
\nshould\tbe  made liable to pay tax only\t on  the  commission
\nearned by them during the period that they had worked as the
\nManaging Agents of the respective Companies.
\nThe Income-tax Officer and the Excess Profits Tax.   Officer
\nappear\tto have discovered that the amounts of the  Managing
\nAgency commission earned by the Sassoons prior to the  dates
\nof  the\t respective transfers were not brought\tto  tax\t and
\ntherefore  issued  on  the 29th June,  1946,  notices  under
\nsection\t 34 of the Indian Income -tax Act and section 15  of
\nthe  Excess Profits Tax Act upon the Sassoons on the  ground
\nthat  their  income  from the Managing\tAgency\thad  escaped
\nassessment.   The Income-tax Officer and the Excess  Profits
\nTax  Officer wanted to include in the assessable  income  of
\nthe  Sassoons  Rs.  28,51,934 made up of  Rs.  25,61,629  in
\nrespect\t of the Managing Agency of the E. D. Sassoon  United
\nMills  Ltd.,  for  the\tperiod of 11  months  from  the\t 1st
\nJanuary,  1943,\t to the 30th November, 1943, Rs.  99,001  in
\nrespect of the Managing Agency of the
\n318<\/span>
\nElphinstone spinning and Weaving Mills Ltd   for the  period
\nof five months from the 1st January, 1943, to the 31st\tMay,
\n1943, and ]Rs. 1,91,304 in respect of the Managing Agency of
\nthe Apollo Mills Ltd., for the period of six months from the
\n1st  January, 1943, to the 30th June, 1943, contending\tthat
\nsuch Managing Agency commission had accrued to the  Sassoons
\nfor  services  rendered so that on the dates  on  which\t the
\nAgencies were transferred the Sassoons were entitled to such
\nremuneration  from  the\t managed Companies in  the  form  of
\ncommission  for\t services rendered up to the  dates  of\t the
\ntransfers.   In spite of the objection of the  Sassoons\t the
\nIncome-tax  Officer  and  the  Excess  Profits\tTax  Officer
\ndetermined these sums as their escaped incomes and  assessed
\nthem  accordingly.  The Sassoons appealed to  the  Appellate
\nAssistant Commissioner who dismissed the appeals and further
\nappeals\t were  taken to the Income-tax\tAppellate  Tribunal.
\nThe Incometax Appellate Tribunal relied upon its order dated
\nthe 28th December, 1949, in the case of the transferees\t and
\nconfirmed  the\torders\tof  the\t Appellate  Assistant\tCom-
\nmissioner.  The Tribunal was of the opinon that the Managing
\nAgency\tcommission  was\t earned for  services  rendered\t and
\ntherefore  it  was  taxed in the hands\tof  the\t person\t who
\ncarried\t on the business of the Managing Agency and  not  in
\nthe  hands of the person to whom it was\t assigned,  and-that
\ntherefore so far as the Sassoons were concerned the Managing
\nAgency\tcommission  should be apportioned between  them\t and
\ntheir transferees.\n<\/p>\n
The  Sassoons  applied\tunder section 66(1)  of\t the  Indian
\nIncome-tax Act and section 21 of the Excess Profits Tax\t Act
\nrequesting the Tribunal to draw a statement of the case\t and
\nrefer  the question of law arising out of the orders to\t the
\nHigh Court for its decision.  On the 12th January, 1951, the
\nTribunal  by its statement of the case referred to the\tHigh
\nCourt  one  question of law as arising out  of\tits  orders,
\nviz.,  ”  whether in the circumstances of the case  was\t the
\nManaging Agency commission liable to be apportioned  between
\nthe  assessee Company and the assignee ” observing  that  in
\nits  opinion the question was not when the  Managing  Agency
\ncommission  accrued  but the real question was\tto  whom  it
\naccrued.  This reference was made by the
\n319<\/span>
\nTribunal  in  R.A. No. 474 of 1950-51, and R.A. No.  475  of
\n1950-51 referring the question of law thus framed in   regard
\nto the Managing Agency commission of the  D. Sassoon  United
\nMills  Ltd., and the Elphinstone Spinning and Weaving  Mills
\nLtd.,  the  whole of the Managing Agency  commission  having
\nbeen  paid respectively to Messrs.  Agarwal and Company\t and
\nto  Chidambaram Mulraj and Company Ltd., in the\t year  1944.
\nThis was Income-tax Reference No. 27 of 1951.
\nThe  Commissioner of Income-tax Excess Profits\tTax,  Bombay
\nCity, also required the Tribunal to refer to the High  Court
\nthe  question of law arising out of its order in the  appeal
\nof  Messrs.  Agarwal and Company in which the  Tribunal\t had
\nheld as above that the Managing Agency comniission should be
\napportioned  between the Sassoons and the transferees.\t The
\nstatement  of  the  case was accordingly  submitted  by\t the
\nTribunal on the 12th January, 1951, and the same question as
\nabove  was referred to the High Court.\tThis  reference\t was
\nIncome-tax Reference No. 24 of 1951.\n<\/p>\n
A  similar  application\t was made  by  the  Commissioner  of
\nIncome-tax\/Excess Profits Tax, Bombay City, for reference in
\nthe  appeal  of\t Chidambaram Mulraj and\t Company  Ltd.\t The
\nTribunal  submitted its statement of case also on  the\tsame
\nday  and referred the very same question to the High  Court.
\nThis reference was Income-tax Reference No. 23 of 1951.
\nAll  these  references came for hearing and  final  disposal
\nbefore the High Court.\tIncome-tax References Nos. 24 and 27
\nof 1951 were heard together and one judgment was  delivered,
\nanswering  the question submitted to the High Court in\tboth
\nthe  references\t in the affirmative.   Following  upon\tthis
\njudgment the High Court also answered in the affirmative the
\nquestion  which had been referred to it by the\tTribunal  in
\nIncome-tax  Reference No. 23 of 1951.  The decision  of\t the
\nHigh  Court was thus against the contentions which had\tbeen
\nurged  both by the Sassoons and the Commissioner of  Income-
\ntax and the Sassoons as well as the Commissioner of  Income-
\ntax  obtained  leave  under section  66A(3)  of\t the  Indian
\nIncome-tax Act and
\n320<\/span>
\nsection 133(1)((c) of the Constitution for filing appeals to
\nthis Court.  The appeal of the Sassoons was Civil Appeal No.
\n3  of  1953, and it was filed against  the  Commissioner  of
\nIncome-tax, Bombay City.  The appeals of the Commissioner of
\nIncome-tax   against  Messrs.\tAgarwal\t and   Company\t and
\nChidambaram Mulraj and Company Ltd., respectively were Civil
\nAppeal\tNo.  30 of 1953, and Civil Appeal No.  31  of  1953.
\nThese  appeals\thave  come for hearing\tand  final  disposal
\nbefore us.\n<\/p>\n
All  the  appeals raise one common question  of\t law,  viz.,
\nwhether in the circumstances of the case the Managing Agency
\ncommission was liable to be apportioned between the Sassoons
\nand  their respective transferees in the proportion  of\t the
\nservices rendered as Managing Agents by each one of them and
\nthe decision turns upon the question whether any income\t had
\naccrued\t to  the  Sassoons on the dates\t of  the  respective
\ntransfers of the Managing Agencies to the transferees or  at
\nany  time  thereafter.\t This  judgment\t will  (,-over\t our
\ndecision in all the appeals.\n<\/p>\n
It will be convenient at this stage to set out the  relevant
\nclauses of the respective Managing Agency Agreements and the
\ndeeds of assignment and transfer.\n<\/p>\n
The  original agreement with the E.D. Sassoon  United  Mills
\nLtd.,  was entered into on the 24th February, 1920,  by\t Sir
\nEdward\t Sassoon   and\tothers\tcarrying  on   business\t  in
\npartnership  in the style and form of Messrs.  E.D.  Sassoon
\nand  Company.  The Managing Agency was transferred with\t the
\nconsent\t of the Company by E. D. Sassoon and Company to\t the
\nSassoons and another Managing Agency Agreement was  executed
\nbetween\t the  Company and the Sassoons on the  2nd  October,
\n1934, appointing and recognising the latter as the Agents of
\nthe  Company from the lst January, 1921, for the residue  of
\nthe period and upon the same terms and conditions set out in
\nthe original Agreement dated the 24th February, 1920.  Under
\nclause\t1 of that Agreement the Sassoons and  their  assigns
\nwere appointed the Agents of the Company for a period of  30
\nyears  from  the  date\tof  the\t registration  thereof\t and
\nthereafter  until they resigned or were removed from  office
\nby a special resolution of
\n321<\/span>
\nthe  Company.\tUdder  clause. 2  the  remuneration  of\t the
\nSassoons and their assigns was fixed at a commission of 71\/2
\nper cent. per annum on the annual net profit of the  Company
\nafter  making  all  proper allowances  and  deductions\tfrom
\nrevenue\t for  working  expenses\t charge-  the  able  against
\nprofits,  provided  however  that if in\t any  year  no\tsuch
\ncommission  was earned or it fell short of Rs. 1,20,000\t the
\nCompany\t was to pay to them a sum sufficient to make up\t the
\nminimum remuneration of Rs. 1,20,000 per annum on account of
\nsuch commission.  The said commission was under clause\t2(d)
\nto  be due to them yearly on the 31st of March in  each\t and
\nevery year. during the continuance of the Agreement and\t was
\nto  be payable and to be paid immediately after\t the  annual
\naccounts of the Company had been passed by the shareholders.
\nUnder  clause 3 the Sassoons and their assigns\tagreed\twith
\nthe Company that they. would be and act as the Agents of the
\nCompany\t during the said term for the said remuneration\t and
\nupon  and  subject  to\tthe  terms  and\t conditions  therein
\ncontained.  Clause 10 of the Agreement provided as under:-
\n”  It  shall  be lawful for the said  firm  to\tassign\tthis
\nAgreement  and the rights of the said firm hereunder to\t any
\nperson, firm or Company having authority by its constitution
\nto  become bound by the obligations undertaken by  the\tsaid
\nfirm  hereunder\t and  upon such assignment  being  made\t and
\nnotified to the said Company the said Company shall be bound
\nto recognise the person or firm or Company aforesaid as\t the
\nAgents of the said Company in like manner as if the name  of
\nsuch person, firm or Company had entered into this Agreement
\nwith  the said Company and the said Company shall  forthwith
\nupon  demand by the said firm enter into an  Agreement\twith
\nthe  person,  firm  or\tCompany\t aforesaid  appointing\tsuch
\nperson,\t firm or Company the Agents of the said Company\t for
\nthe then residue of the term outstanding under the Agreement
\nand  with the like powers and authorities  remuneration\t and
\nemoluments  and subject to the like terms and conditions  as
\nare herein contained.”\n<\/p>\n
The  letter  dated the 3rd September,  1943,  recording\t the
\nAgreement of transfer of the Managing Agency
\n322<\/span>
\n322<\/span>
\nprovided  that\tin the event of the transaction\t being\tcom-
\npleted\tin  its entirety as therein stated  the\t transferees
\nwould  be entitled to receive the commission payable by\t the
\nCompany\t under the Managing Agency Agreement in the  profits
\nfor  the  calendar year 1943.  The deed\t of  assignment\t and
\ntransfer executed between the Sassoons and Messrs.   Agarwal
\nand  Company  in  pursuance of this Agreement  on  the\t26th
\nJanuary, 1945, stated that the Sassoons thereby\t transferred
\nto  Messrs.  Agarwal and Company as from the  lst  December,
\n1943, their office as Managing Agents of the Company for the
\nunexpired residue of the term created by the said  Agreement
\ndated  the 24th February, 1920, as also the said  Agreements
\ndated  the 24th February, 1920, and the 2nd  October,  1934,
\nand all their rights and benefits as Managing Agents  ‘under
\nthe said Agreements and Messrs.\t Agarwal and Company  agreed
\nto  be\tthe  Managing Agents of the Company from  the  1  st
\nDecember, J 943, in place, and stead of the Sassoons for the
\nsaid  unexpired\t residue  of  the  term\t with  like   powers
\nauthorities remuneration and emoluments as were contained in
\nthe  said Agreements.  It may be noted that even though\t the
\nletter\t recording  the\t Agreement  of\ttransfer   expressly
\nprovided  that the transferees would be entitled to  receive
\nthe  commission\t payable by the Company under  the  Managing
\nAgency\tAgreement on the profits for the calendar year\t1943
\nno such term was incorporated in the deed of assignment\t and
\ntransfer.\n<\/p>\n
       The  original Agreement entered into by\tthe  Elphin-
\nstone  Spinning\t and Weaving Mills Company  Ltd.,  was\twith
\nMessrs.\t  Hajee\t Mahomed Hajee Esmail and  Company  and\t was
\ndated  the  24th  July,\t 1919.\t The  Managing\tAgency\t was
\ntransferred  with  the\tconsent of the\tCompany\t by  Messrs.
\nHajee  Mahomed Hajee Esmail and Company to the Sassoons\t and
\non  the 23rd May, 1922, another Managing,  Agency  Agreement
\nwas executed by the Company in favour of the Sassoons  their
\nsuccessors and assigns employing them the Agents of the Com-
\npany from the 1st February, 1922, for the unexpired  ‘Period
\nof the term of 60 years commencing from the 3rd July,  1919.
\nUnder  clause 3 of the Agreement the Company was during\t the
\ncontinuance thereof to pay to
\n323<\/span>
\nthe  Sassoons,\ttheir  successors  and\tassigns\t by  way  of
\nremuneration  a\t commission  of ten per\t cent.\ton  the\t net
\nprofits\t of the Company and a further sum of Rs.  1,500\t per
\nmonth.\t Under clause 6 the Sassooris, their successors\t and
\nassigns\t were to be at liberty to retain, reimburse and\t pay
\nthemselves out of the moneys of the’ Company inter alia\t all
\nsums due to them for commission and otherwise.- The deed  of
\ntransfer  executed by the Sassoons in favour of\t Chidambaram
\nMulraj and Company Ltd., on the 2nd June, 1943, stated\tthat
\nthe  Sassooins assigned and transferred the Agreement  dated
\nthe  23rd May, 1922, between themselves and the company\t for
\nthe  unexpired residue of the term of sixty years  specified
\ntherein and the full benefit and advantage thereof  together
\nwith the benefit of the Agency and the office of the  Agents
\nthereunder  and\t the  right  to\t receive  the\tremuneration
\nthereafter  to\tbecome payable by the Company  under  or  by
\nvirtue\tof the said Agreement and together with the  benefit
\nof all rights, privileges, powers and authorities given\t and
\nconferred on the Sassoons there under.\n<\/p>\n
It  is\tsignificant  to observe that  before  the  incometax
\nauthorities as also the High Court no distinction was  drawn
\nbetween\t the  provisions of these two Agency  Agreements  in
\nregard\tto the right of the Managing Agent  to\tremuneration
\nthereunder  and the facts in so far as they related  to\t all
\nthe Managing Agencies were treated as similar.\tThe  quantum
\nalso  was not disputed in each case though the principle  of
\napportionment was in dispute.\n<\/p>\n
The  Sassoons were assesse for this “escaped income” on\t the
\nbasis that they had earned the income by rendering  services
\nas  Managing  Agents  to the Companies\tfor  the  respective
\nperiods\t that they continued to be the Managing\t Agents\t and
\nthe transferees had rendered the services for the balance of
\nthe  periods completing the full year of accounting and\t had
\nearned the proportionate commission and therefore the amount
\nof  commission which the latter actually  received  included
\nthe  Sassoons’ share of commission in respect of which\tthey
\nwere  not  liable to tax but the Sassoons.  The\t High  Court
\nadopted\t this test of the services rendered by the  Sassoons
\nas well as the transferees during the whole of
\n325<\/span>
\nbecome\ta debt due by the Companies to the Sassoons  and  it
\ncould  not therefore be said to have accrued to\t them.\t The
\ncontract  of  employment was an entire’ and  an\t indivisible
\ncontract  and the remuneration payable by the  Companies  to
\nthe  Sassoons thereunder was payable at stated periods.\t  It
\nwas  a\tcondition  precedent to\t the  Sassoons\tearning\t the
\nremuneration   that  they  fulfilled  the  terms  of   their
\nemployment, completed the period for which the\tremuneration
\nwas  payable  to  them and the service\tfor  the  particular
\nperiod\twas  a\tcondition precedent  to\t their\tearning\t the
\nremuneration for that period.  The stated period was that of
\na year and no remuneration was payable to the Sassoons\ttill
\nthe end of the year and unless and until they completed\t the
\nperiod\tof  the\t year  they would not  be  entitled  to\t any
\ncommission  or remuneration for the year, much less for\t the
\nbroken period.\tIt was therefore contended that the Sassoons
\nhad  not  earned any commission for the broken\tperiods\t and
\nthat not having earned the same they could not have assigned
\nit  to\tthe  transferees  with\tthe  result  that  when\t the
\ntransferees were paid the commission under the terms of\t the
\nManaging  Agency  Agreements, the transferees  received\t the
\nsame  in their own right even though they had  not  rendered
\nthe  services to the Company for the whole of  the  calendar
\nyear  1943.  It was contended that in any event, what.\tever
\nbe   the   position  as\t between  the  Companies   and\t the
\ntransferees,  the  Sassoons had not earned any part  of\t the
\nManaging  Agency  commission  which had\t been  paid  by\t the
\nCompanies  to the transferees and were not liable to tax  in
\nrespect of the same.\n<\/p>\n
It was on the other hand urged on behalf of the\t transferees
\nthat even though under the terms of the deeds of  assignment
\nand  transfer they were paid by the Companies the  whole  of
\nthe  Managing Agency commission for the calendar  year\t1943
\nthey  had merely earned the commission or  remuneration\t for
\nthe  period  of\t actual services rendered  by  them  to\t the
\nCompany\t and the portions of the Managing Agency  commission
\nproportionate  to  the\tservices actually  rendered  by\t the
\nSassoons to the Companies had accrued to the Sassoons though
\nit  had been ascertained and paid to the transferees in\t the
\nyear 1944.  Even though the asceertainment
\n326<\/span>
\nand the payment came later it made no difference which could
\nbe referred to the accrual of the income back to the  period
\nduring\twhich  the income  was earn  Ltded  and\t accordingly
\nwhatever  amount was earned by\tme the Sassoons\t durin’g the
\nrespective  periods  that  they had acted  as  the  Managing
\nAgents\tof  the Companies had accrued to them  during  those
\nperiods\t and was received by the transferees only by  virtue
\nof the respective deeds of assignment and transfer.   Having
\nbeen received by the transferees by virtue of the assignment
\nthose portions of the Managing Agency commission received by
\nthem  none the less constituted income which had accrued  to
\nthe Sassoons and were liable to tax against the Sassoons the
\nassignors and not against them the  assignees.
\nThe  position  of an employee under an\tentire\tcontract  of
\nservice\t has  been  thus enunciated in\tHalsbury’s  Laws  of
\nEngland-Hailsham Edition-Vol. 22, page 133, paragraph 221:-
\n“When  the  contract  of  service  is  an  entire  contract,
\nproviding for payment on the completion of a definite period
\nof  service,  or of a definite piece of work, it is  a\tcon-
\ndition\tprecedent to the recovery of any salary or wages  in
\nrespect thereof that the service or duty shall be completely
\nperformed, unless the employer so alters the contract as  to
\nentitle\t the servant to regard it at an end, in\t which\tcase
\nthe  whole  sum payable under the contract becomes  due,  or
\nunless\tthere  is a usage that the servant  is\tentitled  to
\nwages  in proportion to the time actually served.  But\twhen
\nthe  contract,, though in respect of work terminating  at  a
\nparticular  time,  is  to be  construed\t as  providing\tthat
\nremuneration  shall accrue due and become vested  at  stated
\nperiods,  such remuneration constitutes a, debt\t recoverable
\nat the end of each such period of service.”\n<\/p>\n
Section 219 of the Indian Contract Act also provides that in
\nthe  absence  of  any  special\tcontract,  payment  for\t the
\nperformance  of\t any act is not due to the agent  until\t the
\ncompletion of such act.\n<\/p>\n
Our  attention was drawn in this connection to the  case  of
\nBoston Deep Sea Fishing and Ice Co. v. Ansell(1).
\n39 Ch.\tD. 339.\n<\/p>\n
\t\t\t    327<\/span><\/p>\n
In  that  case the defendant was employed  as  the  managing
\ndirector of the company for 5 years, at a yearly salary.  He
\nwas  dismissed for misconduct before the expiration  of\t the
\ncurrent\t year  and claimed against the company\tdamages\t for
\nwrongful dismissal and the salary for the quarter which\t had
\nexpired\t before\t his dismissal.\t His claim  for\t salary\t was
\ndisallowed  and it was, held that having been dismissed\t for
\nmisconduct  he\twas not entitled to any part of\t the  unpaid
\nsalary\tfor the current year of his service.   Lord  Justice
\nCotton at page 360 posed the question as under:-
\n“Can  he sue for a proportionate part of the salary for\t the
\ncurrent\t  year?……………\tWhat  he  would\t have\tbeen
\nentitled  to if he continued in their service until the\t end
\nof  the year would have been pound 8OO, but in\tmy;  opinion
\nthat  would give him no right of action until the  year\t was
\ncompleted.”\n<\/p>\n
Lord Justice Bowen observed at page 364:-\n<\/p>\n
“As regards his, current salary it is clear and\t established
\nbeyond\tall  doubt by  authorities……………  that\t the
\nservant\t who  is  dismissed for\t wrongful  behaviour  cannot
\nrecover\t his  current  salary, that is\tto  say,  he  cannot
\nrecover\t salary which is not due and payable at the time  of
\nhis  dismissal\tbut which is only to accrue due\t and  become
\npayable at some later date, and on the condition that he had
\nfulfilled his duty as a faithful servant down to that  later
\ndate.”\n<\/p>\n
The case of Moriarty v. Regents Garage & Engineering Company
\nLimited(1)  was\t particularly  relied upon  by\tthe  learned
\ncounsel\t for  the  Sassoona.  No question  of  dismissal  or
\nremoval for misconduct arose in that case, but the  director
\nwhose  remuneration was fixed “at the rate of  pound150\t per
\nannum”\tceased\tto be a director on settlement\tof  disputes
\nbetween\t himself  and the company the director\tagreeing  to
\naccept\tpayment of all money due to him upon his  debentures
\nand the debentures being paid off in the middle of the year.
\nThe  director  sued the company to recover  a  proportionate
\npart  of  the pound 150 as his fees for the  broken  period.
\nThe Deputy County Court Judge gave judgment for the company,
\n(1)  (1921] 2 K.B. 766,
\n328<\/span>
\nholding\t that the director was not entitled  to\t remuneraion
\nfor  a broken part of a year.  The Divisional  Court  versed
\nthe decision of the Deputy County Court judge and there\t was
\na  further appeal.  It was held by the Court of Appeal\tthat
\nneither\t under the Agreement or under the articles  was\t the
\ndirector  entitled to the he claimed.  The question  of\t the
\napplicability  of  the Apportionment Act was  sought  to  be
\nraised\tbefore\tthe appeal Court but was not allowed  to  be
\nraised\tin  appeal  as it had not been done  in\t the  County
\nCourt. arriving at this decision Lord Sterndale M.R.  stated
\nthe position as follows at page 774:–\n<\/p>\n
“it seems to me that upon the construction of the  agreement
\nit  must fail.\tIt is a payment per annum, a payment  for  a
\nyear,  And unless he serves for the year the cannot get\t the
\npayment.”\n<\/p>\n
The  decision in Swabey v. Port Darwin Gold  Mining  to.(1),
\nhad been cited before the Court of Appeal in support of\t the
\nproposition that the director was in such cases entitled  to
\nhis  proportionate remuneration for the broken period.\t The
\nLearned Master of the Rolls however observed at page 777:-
\n“There\tis  nothing  is Swabey v. Port\tDarwin\tGold  Mining
\nCo.(1)\tin  my opinion to oblige us to\thold  that  wherever
\nthere  is  power,  mutual  or one  sided,  to  terminate  an
\nagreement in the middle of the year, there must, as a matter
\nof necessity, be inferred a right to rceive payment from day
\nto day, and receive payment for the broken period.  I do not
\nthink in this case there re circumstances which oblige me or
\ninduce me to raw that inference.”\n<\/p>\n
These  authorities  as\twell as the  cases  of\tMapleson  v.
\nyears(2),  and\tSanders v. Whittle(3), enunciate  the  well-
\nstablished  principle  that  wages  and\t salaries  are\t not
\napportionable  upon  the sudden cessation of a\tcontract  of
\nservice, which is stated to be still the law in Batt on\t the
\nLaw  of\t Master and Servant, 4th Edn., at page 209  until  a
\nhardy  litigant\t successfully  seeks in\t a  higher  Court  a
\nconfirmation  of  the  view  of\t McCardie  J.  expressed  in
\nMoriarty’s case(4) as regards the injustice
\n(I) I Meg. 385.\t\t     (3) 33 L.T. 816.\n<\/p>\n
(2) 28 T,L.R. 30.\t     (4) [1921] 2 K.B. 766,
\n329<\/span>
\nof denying the benefit of the Apportionment Act to a man who
\nmay  have been guilty of misconduct.  This rule applies\t not
\nonly  when  there is a sudden’ cessation of  a\tcontract  of
\nservice\t by the unilateral act of the master or the  servant
\nbut also when,, there is such cessation by mutual consent of
\nthe parties.  In the former event the servant would be\tPart
\ndeprived  of  his  proportionate wages by  his\town  act  or
\ndefault\t or he would be able to sue his master\tfor  damages
\nfor  wrongful  dismissal,  but no  claim  for  proportionate
\nsalary or wages would survive under the contract of service.
\nIn  the\t latter event the consensus of opinion\tbetween\t the
\nmaster and the servant would be sufficient to terminate\t the
\ncontract of service and no claim for proportionate wages  or
\nsalary\twould survive unless it was made an express term  of
\nthe  Agreement\tthus  arrived at between  the  parties.\t  In
\neither\tevent  there  would be no question  of\tthe  servant
\nclaiming  from\this master wages or salary  for\t the  broken
\nperiod.\n<\/p>\n
Learned counsel for the transferees attempted to throw doubt
\non the correctness of the rule as enunciated above by citing
\na passage from Palmer’s Company Precedents-16th Edition-Vol.
\n1, page 583, where the learned author discusses the question
\nof  apportionment  in the case\tof  director’s\tremuneration
\npayable at so much per annum:-\n<\/p>\n
“Where the clause provides that a director is to be paid  so
\nmuch  per annum, the words ‘at the rate of’  being  omitted,
\nand he vacates office before the end of a current year,\t the
\nquestion whether he can maintain a claim for an\t apportioned
\npart  of  the remuneration for that year has given  rise  to
\nsome  difference of opinion.  In Swabey v. Port Darwin\tGold
\nMining\tCompany(1), in the Court of Appeal, the article\t was
\nas follows, and not as stated in the report: ‘The  directors
\nshall  each receive by way of remuneration out of the  funds
\nof  the Company in each year the sum of pound 2OO,  and\t the
\nchairman in addition pound 100 per annum.’ The words at\t the
\nrate  of’  were not present (as appears\t from  the  articles
\nregistered ‘at Somerset House).\t A director resigned in\t the
\ncourse of a current year,\n<\/p>\n
(i)  (1889) I Meg. 385.\n<\/p>\n
43<\/span>
\n330<\/span><\/p>\n
and  was  held\tentitled  to  an  apportioned  part  of\t the
\nremuneration for that year.\n<\/p>\n
But in Salton v. New Beeston Cycle Co.(1), where the article
\nprovided that ‘the directors shall ‘ be entittled to receive
\nby  way\t of remuneration in each year pound  5,000,  Cozens-
\nHardy J. held that a director who vacated office before\t the
\nend of a current year was not entitled to any apportionment.
\nThis case was followed by Wright J. in McConnell’s Claim(2),
\nthe  words  being ,each director shall be paid\tthe  sum  of
\npound 300 per annum’ and by Bruce J. in Inman v. Acroyd\t and
\nBert(1).  See also Central de Kapp Gold Mines(4).  In  these
\nfour  cases the Court no doubt proceeded on  the  assumption
\nthat  the report of Swabey’s case(5) was correct,, and\tthat
\nthe  article in that case contained the words ‘at  the\trate
\nof.’   Certainly  Lord\tAlverstone  C.\tJ.  acted  on\tthis
\nassumption  in Harrison v. British Mutoscope, etc.,  Co.(,).
\nThere the words were ‘the sum of E 1,500 per annum.  In ‘the
\nmeantime  Inman v. Acroyd(7) had been taken to the Court  of
\nAppeal,\t and affirmed, but on the ground that it was by\t the
\narticles   left\t  to  the  directors,\tto   apportion\t the
\nremuneration at the end of each year.\n<\/p>\n
This  case, therefore, really turned on the construction  of
\nthe   particular   article,   and  as\tit   was   carefully
\ndistinguished  from Swabey’s case(5), the authority of\tthat
\ncase,  on  an article omitting the Words ‘at the  rate\tof,’
\nremains unshaken.” Swabey’s case(5) was referred to by\tLord
\nSterndale  M.  R. at page 777 in Moriarty  case(3)  and\t the
\nlearned Master of the Rolls stated that there was nothing in
\nthat case which would oblige the Court to hold that wherever
\nthere  was  power,  mutual or  one-sided,  to  terminate  an
\nAgreement in the middle of the year, there must, as a matter
\nof  necessity, be inferred a right to receive payment  from.
\nday to day, and receive payment for the broken period.\n<\/p>\n
(i)  [1898] I Ch. 775-\n<\/p>\n
(2)  [1901] I Ch. 728.\n<\/p>\n
(3)  [1900] 82 L.T.. 621; on appeal [1901] I Q.B., 613.
\n(4)  (1899) W.N. 216, 235; 69,L.J. Ch. 18 (Wright J.).
\n(5)  (1889) I Meg. 385.\n<\/p>\n
(6)  Times, Nov. 10, 1903.  P. 3.\n<\/p>\n
(7)  [1901] I Q.B. 613.\n<\/p>\n
(8)  [1921] 2 H.B,D. 766.\n<\/p>\n
331<\/span><\/p>\n
It really depended on the circumstances of each case whether
\nto  draw  that inference or not.  In any event we  have\t not
\nbefore us under the terms of the Managing Agency  Agreements
\nany provision for payment of remuneration ” at the rate of ”
\nany  particular sum a, year and the ratio of the four  cases
\nreferred  to by Palmer in the passage quoted above  as\talso
\nthe  observations  of Lord Sterndale M. R. at  page  777  in
\nMoriarty’s  case (1) set out above are sufficient to  enable
\nus  to hold that when the remuneration or commission is\t ex-
\npressed at so much per annum without anything more it  would
\namount\t in  law  to  a\t stipulation  for  the\tpayment\t  of
\nremuneration per year and the servant would not be  entitled
\nto  get any remuneration unless and until he has  completely
\nperformed  his\tcontract  and such performance\twould  be  a
\ncondition  precedent to the recovery of any wages or  salary
\nfor  that  definite period of service.\tThat  would  be\t the
\nposition  even\tif the remuneration was to  accrue  due\t and
\nbecomes\t vested\t at stated periods and\tunless\tthe  servant
\nperformed the condition and fulfilled his duty as a faithful
\nservant down to that stipulated date or the stated period no
\nsalary\twould accrue due and become payable to him until  at
\nthe end of such period of service.\n<\/p>\n
We  shall  now\texamine the terms  of  the  Managing  Agency
\nAgreements  with  a view to see whether\t the  Sassoons\twere
\nentitled  thereunder to remuneration or commission  for\t the
\nbroken\tperiods.   The Agreement between the E.\t D.  Sassoon
\nUnited\tMills Ltd. and the Managing Agents was for  a  fixed
\nperiod of 30 years from the date of the registration of\t the
\nCompany\t and thereafter until they resigned or were  removed
\nfrom their office by a special resolution of the Company and
\nthe  appointment of the firm of E. D . Sassoon\tand  Company
\nand  their assigns was for the whole period.  E. D.  Sassoon
\nand Company and their assigns covenanted and agreed with the
\nCompany\t to be and act as such Agents for  the\tremuneration
\nand  upon  and subject to the terms and\t conditions  therein
\ncontained.   It was lawful for them to assign the  agreement
\nand their rights thereunder to any person, firm or ‘Company
\n(1)  [1921) 2 K.B.D. 766.\n<\/p>\n
332<\/span><\/p>\n
having\tauthority  by its constitution to  become  bound  by
\nthese  obligations and upon such assignment being  made\t and
\nnotified to the Company, the Company was bound to  recognise
\nsuch person, firm or Company as the Agents of the Company in
\nlike  manner as if the name of such person, firm or  Company
\nhad  appeared in these presents in lieu of the names of\t the
\npartners of E. D. Sassoon and Company and as if such person,
\nfirm  or  Company had entered into the\tAgreement  with\t the
\nCompany and the Company agreed upon demand to enter into  an
\nAgreement appointing such person, firm or Company the Agents
\nof the Company for the then residue of the term\t outstanding
\nunder the Agreement and with the like powers and authorities
\nremuneration  and emoluments and subject to the\t like  terms
\nand.  conditions as therein contained.\tThese provisions  of
\nthe  Agreement showed the continuity of the Managing  Agents
\nwho  were  employed as the Agents of the  Company  for\tthis
\nspecified period and under the terms and conditions  therein
\nrecorded.   The new or the substituted Managing Agents\twere
\ntreated\t as if they had entered into the Agreement with\t the
\nCompany\t and  their  name  had\tappeared  in  the   original
\nAgreement  in lieu of E. D. Sassoon and Company who were  in
\nthe first instance appointed the Agents of the company These
\nManaging  Agents  described  as such were  to  be  paid\t the
\nremuneration specified in clause 2(a) of the Agreement which
\nwas a commission of 71 per cent per annum on the annual\t net
\nprofits\t of the Company with a stipulation in regard to\t the
\nminimum remuneration of Rs. 1,20,000 per annum.\t Clause 2(d)
\nspecified when the said commission was to become due to\t the
\nManaging  Agents and it provided that the commission was  to
\nbe  due to them yearly on the 31st March in each  and  every
\nyear   during  the  continuance\t of  the   Agreement.\t The
\ncommission  was thus an annual payment calculated  upon\t the
\nannual\tnet profits of the Company and was to be due to\t the
\nManaging  Agents yearly on the 31st March in each and  every
\nyear.\tUnless\tand  until the annual  net  profits  of\t the
\nCompany were determined the 71\/2 per cent. commission  could
\nnot be ascertained but the sum none the less became due on
\n\t\t\t    333<\/span>
\nthe 31st March in each and every year following the close of
\nthe  accounting\t year of the Company.  The’ amount  of\tsuch
\ncommission  did not become a debt’ owing by the\t Company  to
\nthe  Managing Agents until the 31st March in each and  every
\nyear  and  was\tto  be paid  immediately  after\t the  annual
\naccounts of the Company had been passed by the shareholders.
\nThe  postponement  of the date of payment,  in\tthis  manner
\nhowever\t did not prevent the amount of the  commission\tthus
\nascertained  becoming due to the Managing Agents and it\t was
\non the 31st March in each and every year that the amount  of
\ncommission thus calculated at 71 per cent.# per annum on the
\nannual net profits of the Company became due by the  Company
\nto  the\t Managing Agents.  Until and unless  the  accounting
\nyear of the Company had gone by and the Managing Agents\t had
\nserved\tthe Company as their Agents for the full  period  no
\npart of the Managing Agency commission which was payable per
\nyear  in the manner aforesaid could become due to  them\t and
\nthe performance of the service, for the year was a condition
\nprecedent to the Managing Agents being entitled to any\tpart
\nof  the remuneration, or commission for the accounting\tyear
\nof  the- Company.  The Managing Agency\tAgreement  therefore
\nwas an entire and indivisible contract stipulating a payment
\nof remuneration or commission per year and enjoined upon the
\nManaging  Agents  the duty and obligation of  rendering\t the
\nservices  to  the  Company  for the whole  year\t by  way  of
\ncondition  precedent  to their earning any  remuneration  or
\ncommission for the particular accounting year.
\nIt  was however urged that clause 10 of the Managing  Agency
\nAgreement itself contemplated a broken period, because there
\nwas  nothing  therein to prevent the  Managing\tAgents\tfrom
\nassigning  the Agreement and their rights thereunder at\t any
\ntime  in  a particular year during the\tcontinuance  of\t the
\nAgreement.   If the Managing Agents therefore  could  assign
\nthe  Agreement and their rights thereunder it could  not  be
\nsuggested  that\t neither  the  transferors  who\t could\t not
\ncomplete  the  year of service nor the transferees  who\t had
\nalso  not rendered the services as the Managing\t Agents\t for
\nthe
\n334<\/span>
\nwhole of the accounting year could earn any remuneration  or
\ncommission  which  would be payable to the  managing  Agents
\nonly  if they rendered the services to the Company  for\t the
\nwhole year.  It therefore followed as a necessary  corollary
\nthat both the transferors and the transferees would be\tpaid
\ntheir remuneration or commission and both would be  entitled
\nto  the proportionate commission for the respective  periods
\nduring\twhich they rendered services as Managing  Agents  to
\nthe  Company.  This argument however ignores the  fact\tthat
\nwhatever  be the position as between the transferor and\t the
\ntransferee,  whatever  be  their  arrangements\tinter,\t se,
\nwhatever be the periods of the year during which they  might
\nhave  served the Company in their capacity as  the  Managing
\nAgents, the Managing Agents as described in the recitals and
\nclauses\t I and 3 of the Managing Agency Agreement  were\t one
\nentity and no severance of I such periods of service  during
\nthe course of a particular year was ever contemplated  under
\nthe  Agreement.\t  On assignment, the transferee\t became\t the
\nManaging  Agent\t as  if its name had been  inserted  in\t the
\nManaging  Agency  Agreement  from the  beginning.   For\t the
\nfuture\t period\t the  transferor  effaced  itself  and\t the
\ntransferee  took the place of the transferor  and  preserved
\nthe  continuity\t of  the Managing  Agency  so  that  whoever
\nhappened  to satisfy the description of the Managing  Agents
\nat  the\t time when the commission for  the  accounting\tyear
\nbecame due to the Managing Agents thus described, which\t was
\nexpressly stated to be due yearly on the 31st March in\teach
\nand  every year, became entitled to receive the\t debt  which
\nthus became due and to the payment thereof after the  annual
\naccounts of the Company had been passed by the shareholders.
\nThe  stipulation for the Company executing in favour of\t the
\nnew   or  the  substituted  Managing  Agents  an   Agreement
\nappointing  them  the  Agents of the Company  for  the\tthen
\nresidue\t of  the term outstanding under\t the  Agreement\t was
\nmerely\tconsequential  upon the\t earlier  provision  therein
\ncontained which stated in so many terms that the Company was
\nbound  to recognise such new or substituted Managing  Agents
\nin like manner as if their names had appeared in the
\n335<\/span>
\nmid  Agreement in lieu of the partners of E.D.\tSassoon\t and
\nCompany\t and as if they had entered into the Agreement\twith
\nthe Company. The rights of such new or substituted.   Agents
\nwere created by the very terms of clause 10 of the Agreement
\nand the formal embodiment thereof in the fresh Agreement  to
\nbe  entered into by the Company with them  merely  confirmed
\nthe rights which had already been created in them under that
\nclause.\n<\/p>\n
It  was further pointed out that at the end of the  Managing
\nAgency\tAgreement  if not earlier,  during  the\t continuance
\nthereof there would certainly be a broken period because the
\nperiod\tof 30 years stipulated in clause I of the  Agreement
\nwould certainly expire on some date in February, 1950.\t The
\ncalendar  year would expire on the 31st December, 1949,\t and
\nthere  would  of  necessity  be\t between  the  date  of\t the
\nexpiration  of\tthe  calendar  year  and  the  date  of\t the
\nexpiration of the term of the agreement a period of about  2
\nmonths\twhich would certainly be a broken period and  not  a
\nfull  year.  What would happen however on the expiration  of
\nthe  period of the Managing Agency Agreement  cannot  affect
\nthe  construction  of the relevant terms  of  the  Agreement
\nwhich  have  reference\tto  a  year  or\t years\tduring\t the
\ncontinuance   of  the  Agreement.   It\tis  unnecessary\t  to
\nspeculate  as  to whether by reason of the fact that  E.  D.
\nSassoon\t and  Company  must have received  the\tfull  year’s
\nremuneration   or  commission  at  the\tend  of\t the   first
\naccounting  year  of  the  Company  ending  with  the\t31st
\nDecember, 1920, they might just as well give up, if need be,
\ntheir remuneration or commission for the last two months  on
\nthe expiration of the term of the Managing Agency Agreement.
\nWe see nothing in the terms of the Managing Agency Agreement
\nwhich would compel or induce us to hold that there must as a
\nmatter of necessity be inferred therefrom a right to receive
\nremuneration or commission for a broken period.
\nLearned\t counsel  for Chidambaram Mulraj  and  Company\tLtd.
\nhowever\t sought\t to distinguish the terms  of  the  Managing
\nAgency\tAgreement  of the Elphinstone Spinning\tand  Weaving
\nCompany Ltd. from those of the
\n336<\/span>
\nManaging Agency Agreement of the E. D. Sassoon United  Mills
\nCompany\t  Ltd.\teven  though  as  stated  ‘before  no\tsuch
\ndistinction   was   made  either   before   the\t  income-tax
\nauthorities or the High Court.\tHe contended that there\t was
\nnothing\t in  the  Agency  Agreement  with  the\t Elphinstone
\nSpinning  and Weaving Company Ltd. which  corresponded\twith
\nclauses\t 2(a), 2(d) and clause 10 of the  Agreement  between
\nthe  E. D. Sassoon United Mills and their  Managing  Agents.
\nThe only term which was to be found in the Agency  Agreement
\nof  the\t Elphinstone Spinning and Weaving Company  Ltd.\t was
\nthat the Company was during the continuance of the Agreement
\nto pay to the Managing Agents who were there described as E.
\nD.  Sassoon  and  Company Ltd. their  successors  and  their
\nassigns by way of remuneration a commission of ten per cent.
\non  the net profits of the Company and a further sum of\t Rs.
\n1,500  per  month.   There  was\t besides  clause  6  of\t the
\nAgreement which conferred upon the Managing Agents the right
\nof retainer, and reimbursement in connection inter alia with
\nall  sums  due to them for commission or  otherwise.   These
\nterms  it  was submitted did not constitute the\t payment  of
\nremuneration  or commission a payment per annum and  it\t was
\nnot possible to argue that the Sassoons were not entitled to
\nany   remuneration  or\tcommission  for\t a   broken   period
\nthereunder.\n<\/p>\n
It  may\t however  be  observed\tthat  the  Managing   Agency
\nAgreement with which we are here concerned was the Agreement
\ndated  the  23rd  May, 1922, between  the  Company  and\t the
\nSassoons and the Managing Agents there described were E.  D.
\nSassoon\t and  Company  Ltd on behalf  of  themselves,  their
\nsuccessors and assigns.\t Clause 1 of the Agreement  employed
\nthe Sassoons, their successors and assigns the Agents of the
\nCompany\t from  the 1 st February, 1,922, for  the  unexpired
\nportion\t of  the term of 60 years commencing  from  the\t 3rd
\nJuly, 1919, and it was these Managing Agents thus described,
\nviz.,  the Sassoons, their successors and assigns, who\twere
\nduring the continuance of the Agreement to be remunerated by
\na  commission  of  10 per cent. on the net  profits  of\t the
\nCompany\t and  the Company agreed to pay such  commission  to
\nthem.  The
\n337<\/span>
\nright of retainer and reimbursement reserved under clause  6
\nof the Agreement would not carry the transferees any further
\nbecause\t it  -was  in respect of all sums due  to  them\t for
\ncommission  or otherwise.  Unless and until  the  commission
\nbecame\tdue to them they had no such right of retainer.\t  It
\nwould still have to be determined whether any sum became due
\nto  them by way of such commission.  Whether any  commission
\nbecame\tdue  to them would depend upon the  construction  of
\nclause\t3  of  the  Agreement  and  under  that\t clause\t the
\ncommission calculated at 10 per cent. of the net profits  of
\nthe Company was to become due to them and was to be paid  by
\nthe Company to them during the continuance of the Agreement.
\nWe  have  got to determine what is the full  implication  of
\nthis  clause  of the Agreement,-“the commission\t of  10\t per
\ncent. on the net profits of the Company.” The word “profits”
\nhas  a\twelldefined legal meaning as was  observed  by\tLord
\nJustice Fletcher Moulton at page 98 in The Spanish Prospect-
\ning Company Limited(1):\n<\/p>\n
“The  word ‘Profits’ has in my opinion a  welldefined  legal
\nmeaning,  and  this meaning coincides with  the\t fundamental
\nconception  of\tprofits\t in general  parlance,\talthough  in
\nmercantile  phraseology the word may at times bear  meanings
\nindicated  by  the  special context which  deviate  in\tsome
\nrespects  from\tthis fundamental  signification.   ‘Profits’
\nimplies a comparison between the state of a business at\t two
\nspecific  dates usually separated by an interval of a  year.
\nThe  fundamental meaning is the amount of gain made  by\t the
\nthe business during the year.  This can only be\t ascertained
\nby  a  comparison of the assets of the business at  the\t two
\ndates.”\n<\/p>\n
This  concept  of the term was also adopted by\tMr.  Justice
\nMahajan,  as  he then was, in  Commissioner  of\t Income-tax,
\nBombay v. Ahmedbhai Umarbhai and Company, Bombay<\/a>(2):
\n“Profits  of a trade or business are what is gained  by\t the
\nbusiness.   The term implies a comparison between the  state
\nof business at two specific dates separated by, an  interval
\nof a year and the fundamental\n<\/p>\n
(i)  [1911] i Ch.  D. 92.\n<\/p>\n
44<\/span><\/p>\n
(2) [1950] i8 I.T.R. 472 at page 5o2.\n<\/p>\n
338<\/span><\/p>\n
meaning\t is the amount of gain made by the  business  during
\nthe year and can only be ascertained by a comparison of\t the
\nassets of the business at the two dates, the increase  shown
\nat a later date compared to the ,earlier date represents the
\nprofits of the business.”\n<\/p>\n
It  was urged before us that there was nothing in the  terms
\nof the Agreement which provided that the profits were to  be
\nascertained at the end of every year, and there was  nothing
\nto  prevent  the  Company if it so chose  from\tcasting\t its
\naccounts  and  ascertaining the net profits half  yearly  or
\nquarterly  or  even every month by preparing  trial  balance
\nsheets in that manner.\tTheoretically speaking all this\t may
\nbe  possible  but  we have got to  construe  the  Agreements
\narrived\t at  between business people in a,  business  sense.
\nOrdinarily  in\tthe  case of business  or  trading  concerns
\naccounts of profits are not made except at stated  intervals
\nusually\t separated by a year.  Particularly in the  case  of
\nlimited\t Companies incorporated under the  Indian  Companies
\nAct  the  accounts are cast every year and the\tnet  profits
\nearned\tby the Company are ascertained every year  both\t for
\nthe declaration of dividends and for submitting the  returns
\nto the income-tax authorities.\tUnder section 131 (I)of\t the
\nIndian Companies Act of 1913 every Company was required once
\nat least in every year and at intervals of not more than  15
\nmonths\tto cause the accounts to be balanced and  a  balance
\nsheet  to  be prepared which was called the  annual  balance
\nsheet.\t The  first  schedule to  the  Companies  Act  which
\ncontained  the\tregulations  by which  unless  excluded\t the
\naffairs\t of the Company were to be governed  provided  under
\nRegulation  106 the preparation once at least every year  of
\nthe  profit  and loss account for the period and  under\t the
\nRegulation 108 for the balance sheet to be made out in every
\nyear and laid before the Company in general meeting.  Having
\nregard\tto  the course of business which prevailed  in\tthis
\nCompany also so far as it is evidenced by the fact that\t the
\naccount\t of the Managing Agency commission was made  up\t for
\nthe  calendar year 1943 and was paid to\t Chidambaram  Mulraj
\nand  Company Ltd., who became the Managing Agents  in  place
\nand  stead  of\tthe  Sasssoons\tin  the\t year  1944,  it  is
\nreasonable to assume that the
\n339<\/span>
\naccounts of this Company were throughout made up at the\t end
\nof every calendar year.\t The profit and loss of the  Company
\nwas then ascertained and a commission of 10 per cent. on the
\nnet  profits of the Company was paid to the Managing  Agents
\nof the Company for the, time being.  In the case of  limited
\nCompanies  like\t those before us we would  be  justified  in
\npresuming that normally the accounts are made up every\tyear
\nand  even though there may be a theoretical  possibility  of
\nthe  accounts  being cast half yearly or quarterly  or\teven
\nevery  month  no  such procedure would\tbe  adopted  by\t the
\nCompany.   In any event it would be absurd to  suggest\tthat
\nthe  profits of the Company could accrue from day to day  or
\neven  from month to month.  The working of the Company\tfrom
\nday to day could certainly not indicate any profit or  loss.
\nEven  the working of the Company from month to\tmonth  could
\nnot  be taken as a reliable guide for this purpose.  If\t the
\nprofit or loss has got to be ascertained by a comparison  of
\nthe assets at two stated periods, the most businesslike\t way
\nof  doing  it would be to do so at stated intervals  of\t one
\nyear and that would be a reasonable period to be adopted for
\nthe  purpose.  In the case of large business  concerns\tlike
\nthese  the working of the Company during a particular  month
\nmay  show profits and the working in a particular month\t may
\nshow loss.  The working during the earlier part of the\tyear
\nmay show profit or loss and working in the later part of the
\nyear   may   show  loss\t or  profit  which   would   go\t  to
\ncounterbalance the profit or loss as the case-may be in\t the
\nearlier\t part of the year.  It may as well happen  that\t the
\nprofits\t which the Company may appear to have earned  during
\nthe earlier months of the year or even during the II  months
\nof  the year may be considerably reduced or even  wiped\t out
\nduring\tthe later months or the last months of the  year  by
\nreason\tof some catastrophe or unforeseen events.  It  would
\nbe therefore reasonable to assume that the profit or loss as
\nthe  case  may be should be determined at the end  of  every
\nyear so that on such calculation of net profits the Managing
\nAgents\tmay be paid their remuneration or commission at\t the
\npercentage stipulated in the Managing Agency Agreement and
\n340<\/span>
\nthe  shareholders  also\t be paid dividends out\tof  the\t net
\nprofits\t of  the Company.  We are sure that these  were\t the
\nconsiderations\twhich  weighed with the Managing  Agents  of
\nthis Company in not taking up any such contention before the
\nIncome-tax   authorities  and  the  High  Court\t  that\t the
\nremuneration  or  commission  payable  to  them\t under\t the
\nManaging  Agency Agreement was not payable per year and\t the
\ncontention put forward before us in this behalf was a  clear
\nafter-thought.\tWe would be therefore justified in  treating
\nthe  terms  and\t conditions  in regard\tto  the\t payment  of
\nManaging  Agency  Commission in both these  Managing  Agency
\nAgreements as on a par with each other stipulating for\tsuch
\npayment per year on the net annual profits of the Companies.
\nIf  this  be the true construction of  the  Managing  Agency
\nAgreements  it follows that the contract of service  between
\nthe  Companies\tand  the  Managing  Agents  was\t entire\t and
\nindivisible, that the remuneration or commission became\t due
\nby  the Companies to the Managing Agents only on  completion
\nof a definite period of service and at stated periods,\tthat
\nit was a condition precedent to the recovery of any wages or
\nsalary in respect thereof that the service or duty should be
\ncompletely  performed, that such remuneration constituted  a
\ndebt only at the end of each such period of service and that
\nno  remuneration or commission was payable to  the  Managing
\nAgents for broken periods.\n<\/p>\n
The question still remains whether the remuneration for\t the
\nbroken\tperiods accrued to the Sassoons and  the  contention
\nwhich  was  strenuously\t urged before us on  behalf  of\t the
\ntransferees was that the Sassoons had rendered the  services
\nin terms of the Managing Agency Agreements to the respective
\nCompanies,  that the services thus rendered were the  source
\nof  income and whatever income could be attributed to  those
\nservices  was earned by the Sassoons and accrued to them  in
\nthe  chargeable accounting period though it was\t ascertained
\nand paid in the year 1944 to the transferees.
\nThe  word  “earned” has not been used in section  4  of\t the
\nIncome-tax Act.\t The section talks of ” income,
\n341<\/span>
\nprofits\t and gains ” from whatever source derived which\t (a)
\nare received by or on behalf of the assessee, or (b)  accrue
\nor  arise to the assessee in the taxable territories  during
\nthe chargeable accounting period.  Neither the word ” income
\n” nor the words “is received,” “accrues” and ” arises ” have
\nbeen defined in the Act.  The Privy Council in\tCommissioner
\nof  Income-tax, Bengal v. Shau Wallace & Co.(1) attempted  a
\ndefinition of the term income ” in the words following :-
\n”  Income, their Lordships think, in the  Indian  Income-tax
\nAct, connotes a periodical monetary return ‘ coming in’ with
\nsome  sort  of\tregularity,  or\t expected  regularity\tfrom
\ndefinite  sources.  The source is not necessarily one  which
\nis  expected to be continuously productive, but it  must  be
\none  whose  object is the production of\t a  definite  return
\nexcluding anything in the nature of a mere windfall.”
\nMukerji- J. has defined these terms in Rogers Pyatt  Shellac
\n& Co. v. Secretary of State for India(2):\n<\/p>\n
”  Now what is income?\tThe -term is nowhere defined in\t the
\nAct……  In the absence of a statutory definition we\tmust
\ntake its ordinary dictionary meaning  that which comes in as
\nthe  periodical\t produce of one’s work, business,  lands  or
\ninvestments  (considered  in  reference to  its\t amount\t and
\ncommonly expressed in terms of money) ; annual or periodical
\nreceipts  accruing  to\ta person or  corporation  ”  (Oxford
\nDictionary).  The word clearly implies the idea of  receipt,
\nactual\tor constructive.  The policy of the\\ Act is to\tmake
\nthe  amount  taxable  when it is  paid\tor  received  either
\nactually  or  constructively. i Accrues,’ arises’ and  I  is
\nreceived’ are three distinct terms.  So far as receiving  of
\nincome is concerned there can be no difficulty; it conveys a
\nclear and definite meaning, and I can think of no expression
\nwhich  makes its meaning plainer than the word ‘  receiving’
\nitself The words I accrue  and arise also are not defined in
\nthe  Act.  The ordinary dictionary meanings of\tthese  words
\nhave  got  to be taken as the meanings\tattaching  to  them.
\nAccruing’ is synonymous with ‘arising’ in the sense\n<\/p>\n
(i) I.L.R. 59 Cal.  I343 at p. 1352.\n<\/p>\n
(2) 1 I.T.C. 363 at P. 371
\n342<\/span>
\nof  springing  as  a natural growth or\tresult.\t  The  three
\nExpressions  accrues, I arises ‘ and I is received ‘  having
\nbeen used in the section, strictly speaking ‘accrues’ should
\nhot  be\t taken\tas  synonymous with I  arises’\tbut  on\t the
\ndistinct sense of growing up by way of addition for increase
\nor  as an accession or advantage; while the word  I  arises’
\nmeans  comes  into existence or notice or  presents  itself.
\nThe former connotes the idea of a growth or accumulation and
\nthe  latter  of the growth or accumulation with\t a  tangible
\nshape  so as to be receivable.\tIt is difficult to say\tthat
\nthis  distinction has been throughout maintained in the\t Act
\nand  perhaps the two words seem to denote the same  idea  or
\nideas  very  similar, and the difference only lies  in\tthis
\nthat one is more appropriate than the other when applied  to
\nparticular  cases.  It is clear, however, as pointed out  by
\nFry  L.J.  in  Colquhoun v. Brooks(1),\t[this  part  of\t the
\ndecision  not  having been affected by the reversal  of\t the
\ndecision  by the House of Lords(2)] that both the words\t are
\nused  in  contradistinction  to the word  ”  receive  ”\t and
\nindicate  a  right  to\treceive.   They\t represent  a  stage
\nanterior  to  the  point of time  when\tthe  income  becomes
\nreceivable  and connote a character of the income  which  is
\nmore or less inchoate.\n<\/p>\n
One other matter need be referred to in connection with\t the
\nsection.   What is sought to be taxed must be income and  it
\ncannot be taxed unless it has arrived at a stage when it can
\nbe called ‘income’.”\n<\/p>\n
The observations of Lord Justice Fry quoted above by Mukerji
\nJ. were made in Colquhoun v. Brooks(1) while construing\t the
\nprovisions  of\t16  and 17 Victoria  Chapter  34  section  2
\nschedule ‘D’.  The words to be construed there were’ profits
\nor  gains, arising or accruing’ and it was observed by\tLord
\nJustice Fry at page 59:\n<\/p>\n
”  In  the first place, I would observe that the tax  is  in
\nrespect of ‘profits or gains arising or accruing.’ I  cannot
\nread those words as meaning I received by.’ If the enactment
\nwere limited to profits and gains ‘received\n<\/p>\n
(i)  (1888) 21 Q.B.D. 52 at P. 59.\n<\/p>\n
(2)  (I889) 14 APP.  Cas. 493.\n<\/p>\n
343<\/span><\/p>\n
by’ the person to be charged, that limitation would apply as
\nmuch to all Her Majesty’s subjects as to foreigners residing
\nin  this country.  The result’ would be that  no  income-tax
\nwould be payable upon profits ‘which accrued but which\twere
\nnot  actually  received, although profits  might  have\tbeen
\nearned in the kingdom and might have accrued in the kingdom.
\nI think, therefore, that the words I arising or accruing are
\ngeneral words descriptive of a right to receive profits.”
\nTo the same effect are the observations of Satyanarayana Rao
\nJ.  in\tCommissioner  of Income-tax,  Madras  v.  Anamallais
\nTimber\tTrust  Ltd.<\/a>(1) and Mukherjea J. in  Commissioner  of
\nIncome-tax,  Bombay v. Ahmedbhai Umarbhai &  Co.,  Bombay<\/a>(2)
\nwhere this passage from the judgment of Mukerji J. in Roqers
\nPyatt  Shellac & Co. v. Secretary of State for India(3),  is
\napproved and adopted.  It is clear therefore that income may
\naccrue to an assesee without the actual receipt of the same.
\nIf the assessee acquires a right to receive the income,\t the
\nincome\tcan be said to have accrued to him though it may  be
\nreceived   later  on  its  being  ascertained.\t The   basic
\nconception is that he must have acquired a right to  receive
\nthe  income.  There must be a debt owed to him by  somebody.
\nThere must be as is otherwise expressed debitum in presenti,
\nsolvendum  in  futuro;\tSee  W.\t S.  Try  Ltd.\tv.   Johnson
\n(Inspector  of\tTaxes)(4), and Webb v. Stenton\tand  Others,
\nGarnishees(5).\tUnless and until there is created in  favour
\nof  the\t assessee a debt due by somebody it cannot  be\tsaid
\nthat  he has acquired a right to receive the income or\tthat
\nincome has accrued to him.\n<\/p>\n
The word “earned” even though it does not appear in  section
\n4  of the Act has been very often used in the course of\t the
\njudgments by learned Judges both in the High Courts as\twell
\nas  the\t Supreme Court. (Vide  Commissioner  of\t Income-tax,
\nBombay\t v.  Ahmedbhai\tUmarbhai  &  Co.,   Bombay<\/a>(6),\t and
\nCommissioner  of  Income-tax,  Madras  v. K.  R.  M.  T.  T.
\nThiagaraja Chetty & Co.<\/a>(7).\n<\/p>\n
     (i) 18 I.T.R.1 333 at P. 342.  (5) II Q.B.D. 5i8 at pp.
\n522 and 527′
\n     (2)  [19501] S.C. R. 335 at P. 389.  (6) [1950]  S.C.R.
\n335 at P. 364.\n<\/p>\n
     (3)  I I.T.C. 363 at P. 372.  (7) 24 I.T.R. 525  at  P.\n<\/p>\n
533.
\n     (4) [1946] I A.E.R. 532 at P. 539.\n<\/p>\n
344<\/span><\/p>\n
It has also been used by the Judicial Committee of the Privy
\nCouncil\t in  Commissioners  of\tTaxation  v.  Kirk(1).\t The
\nconcept\t however  cannot  be divorced from  that  of  income
\naccruing  to  the assessee.  If income has accrured  to\t the
\nassessee it is certainly earned by him in the sense that  he
\nhas  contributed to its production or the parenthood of\t the
\nincome\tcan be traced to him.  But in order that the  income
\ncan be said to have accrued to or earned by the assessee  it
\nis   not  only\tnecessary  that\t the  assessee\t must\thave
\ncontributed to its accruing or arising by rendering services
\nor otherwise but he must have created a debt in his  favour.
\nA  debt\t must  have come into existence\t and  he  must\thave
\nacquired  a right to receive the payment.  Unless and  until
\nhis contribution or parenthood is effective in bringing into
\nexistence  a  debt or a right to receive the payment  or  in
\nother  words a debitum in presenti, solvendum in  futuro  it
\ncannot be said that any income has accrued to him.  The mere
\nexpression  “earned” in the sense of rendering the  services
\netc., by itself is of no avail.\n<\/p>\n
If  therefore  on the construction of  the  Managing  Agency
\nAgreements  we\tcannot\tcome  to  the  conclusion  that\t the
\nSassoons  had  created\tany  debt in  their  favour  or\t had
\nacquired a right to receive the payments from the  Companies
\nas at the date of the transfers of the Managing Agencies -in
\nfavour\tof  the transferees no income can be  said  to\thave
\naccrued\t to  them.  They had no doubt rendered\tservices  as
\nManaging  Agents  of the Companies for the  broken  periods.
\nBut unless and until they completed their performance, viz.,
\nthe  completion of the definite period of service of a\tyear
\nwhich  was a condition precedent to their being entitled  to
\nreceive\t  the\tremuneration   or   commission\t  stipulated
\nthereunder, no debt payable by the Companies was created  in
\ntheir  favour and they had no right to receive\tany  payment
\nfrom  the  Companies.  No remuneration or  commission  could
\ntherefore  be said to have accrued to them at the  dates  of
\nthe respective transfers.\n<\/p>\n
It was however urged that even though no income can be\tsaid
\nto  have  accrued  to  the  Sassoons  at  the  date  of\t the
\nrespective transfers which could be the
\n(1)  [1900] A. C. 588 at p. 592,
\n345<\/span>
\nsubject-matter\tof any assignment by them in favour  of\t the
\ntransferees,  the moment the remuneration or commission\t was
\nascertained  at\t the end of the calendar year and  became  a
\ndebt  due  to  the Managing Agents under the  terms  of\t the
\nManaging Agency Agreements it could be referred back to\t the
\nperiod\tin  which  it was earned and  the  portions  of\t the
\nremuneration or commission which were earned by the Sassoons
\nduring the broken period could certainly then be said to  be
\nthe  income which had accrued to them during the  chargeable
\naccounting period.\n<\/p>\n
Reliance   was\tplaced\tis  support  of\t this  position\t  on
\nCommissioners  of  Inland Revenue v. Gardner Mountain  &  D’
\nAmbrumenil,  Ltd.(1). The assessee in that case\t carried  on
\ninter alia the business of underwriting Agents, and  entered
\ninto  Agreements with certain underwriters at  Lloyds  under
\nwhich  it was entitled to -receive as remuneration  for\t its
\nservices  in conducting the Agency, commissions on  the\t net
\nprofits\t  of  each  year’s  underwriting.   The\t  Agreements
\nprovided  that\t”  accounts should be kept  for\t the  period
\nending 31st December in each year and that each such account
\nshall be made up and balanced at the end of the second clear
\nyear  from the expiration of the period or year to which  it
\nrelates\t and the amount then remaining to the credit of\t the
\naccount\t shall be taken to represent the amount of  the\t net
\nprofit\tof  the period or year to which it relates  and\t the
\ncommission  payable to the Company shall be  calculated\t and
\npaid thereon.” The accounts for the underwriting done in the
\ncalendar  year 1936 were made up at the end of 1938 and\t the
\nquestion  that arose was whether the assessee was liable  to
\nadditional assessment in respect of the commission on  under
\nwriter’s  profits  from\t the policies  underwritten  in\t the
\ncalendar  year 1936 in the year in which the  policies\twere
\nunderwritten or in the year when the accounts were thus made
\nup. The assessee contended that the contracts into which  it
\nentered\t were executory contracts, under which its  services
\nwere not completed or paid for, as regards commission, until
\nthe  conclusion of the relevant account; that the profit  in
\nthe form of commission was
\n(I)  29 T.C. 69.\n<\/p>\n
45<\/span><\/p>\n
346.
\nnot  ascertainable or earned, and did not arise, until\tthat
\ntime  and that the additional assessment which was  made  in
\nthe  year  in which the policies  were\tunderwritten  should
\naccordingly   be  discharged.\tThe  Special   ,Commissioner
\nallowed\t the  assessee’s  contention  and,  discharged\t the
\nadditional   assessment.   The\tdecision  of   the   Special
\nCommissioners  was confirmed on appeal by Macnaghten  J.  in
\nthe  King’s Bench Division of the High Court.  The Court  of
\nAppeal\thowever reversed this decision and a further  appeal
\nwas taken by the assessee to the House of Lords.  The  House
\nof  Lords  held\t that  on  the\ttrue  construction  of\t the
\nAgreements,  the commissions in question were earned by\t the
\nassessee   in\tthe  year  in  which   the   policies\twere
\nunderwritten,  and must be brought into account\t accordingly
\nand  confirmed the decision of the Court of Appeal.  It\t may
\nbe  noted  that the charge was on profits  arising  in\teach
\nchargeable  accounting\tperiod and the profits\twere  to  be
\ntaken  to  be the actual profits arising in  the  chargeable
\naccounting  period.  The ratio of the decision was that\t the
\ncommission  paid  was remuneration for\tservices  completely
\nperformed in the particular year, that, the assessee had  at
\nthe end of the year done everything it had to do to earn  it
\nand  that it was remuneration for work done  and  completely
\ndone  in the particular year though it was  ascertained\t and
\npaid two years later.  Viscount Simon in his speech at\tpage
\n93 stated that the assessee had acquired a legal right to be
\npaid  in futuro and that the principle was to refer back  to
\nthe  year  in  which  it  was  earned  so  far\tas  possible
\nremuneration subsequently received even though it could only
\nbe  precisely  calculated. afterwards.\tLord Wright  in\t his
\nspeech at page 94 said that it was necessary to determine in
\nwhat  year the Commission was earned, or in the language  of
\nthe  Act,  in  what year the assessee’s\t profits  arose\t and
\nobserved at page 96 : –\n<\/p>\n
“I  agree  with\t the Court of Appeal in\t thinking  that\t the
\nnecessary conclusion from that must be that the right to the
\ncommission is treated as a vested right which has accrued at
\nthe  time when the risk was underwritten, It has  then\tbeen
\nearned,\t though\t the profits resulting\tfrom  the  insurance
\ncannot be then
\n347<\/span>
\nascertained,  but in practice are not ascertained until\t the
\nend of two years beyond the date of underwriting.  The right
\nis  vested, though its valuation is postponed,’ and  is\t not
\nmerely postponed but depends on all the contingencies which,
\nare  inevitable in any insurance risk, losses which  may  or
\nmay not happen, returns of premium, premiums to be  arranged
\nfor  additional risks, reinsurance, and the whole  catalogue
\nof  uncertain future factors.  All these have to be  brought
\ninto  account according to ordinary commercial practice\t and
\nunderstanding.\tBut the delays and difficulties which  there
\nmay  be in any particular case, however they may affect\t the
\nprofit,\t do  not  affect the right for\twhat  it  eventually
\nproves to be worth.”\n<\/p>\n
Lord  Simonds in his speech at page 110 stated:”
\nIt  is clear  to me that the commission is wholly earned  in
\nyear   1   in  respect\tof  the\t profits  of   that   year’s
\nunderwriting.  If so, I should have thought that it was\t not
\narguable that that commission did not accrue for income-tax-
\npurposes  in that same year though it was not  ascertainable
\nuntil later.”\n<\/p>\n
The  fact  that the account of the commission could  not  be
\nmade  up  until\t later did not make any\t difference  to\t the
\nposition  that the commission had been wholly earned  during
\nthe chargeable accounting period and the income had  accrued
\nto the assessee during that period.\n<\/p>\n
Learned\t counsel  for the transferees also relied  upon\t the
\ndecisions  in Bangalore Woollen, Cotton and Silk Mills\tCo.,
\nLtd.  v. Commissioner of Income tax, Madras(1),\t and  Turner
\nMorrison  and Co., Ltd. v. Commissioner of Income-tax,\tWest
\nBengal<\/a>(2),  to show that as and when the sale proceeds\twere
\nreceived by the Company the profits made by the Company were
\nembedded  in  those  sale proceeds and if that\twas  so\t the
\npercentage  of\tthe  net profits which was  payable  by\t the
\nCompanies to the Managing Agents as and by way of commission
\nwas  similarly\tembedded  in those sale\t proceeds.   If\t the
\nprofits\t thus accrued to the Company. during the  chargeable
\naccounting  period  the commission payable to  the  Managing
\nAgents\talso  could be said to have accrued to\tthem  during
\nthat period.\n<\/p>\n
(I) [1950] is I.T.R 423.\n<\/p>\n
(2) 11953) 23 I.T.R. 152.\n<\/p>\n
348<\/span><\/p>\n
It  is\tno doubt true that the accrual of  income  does\t not
\ndepend\tupon  its  ascertainment or  the  accounts  cast  by
\nassessee.  The accounts may be made up at a much later date.
\nThat depends upon the convenience -of the assessee and\talso
\nupon  the  exigencies of the situation.\t The amount  of\t the
\nincome,\t profits or gains may thus be ascertained  later  on
\nthe accounts being made up.  But when the accounts are\tthus
\nmade  up  the income, profits or gains\tascertained  as\t the
\nresult\tof the account are referred back to  the  chargeable
\naccounting  period during which they have accrued or  arisen
\nand  the  assessee is liable to tax in respect of  the\tsame
\nduring that chargeable accounting period.  “The\t computation
\nof the profits whenever it may take place cannot possibly be
\nallowed to suspend their accrual..:… ……………..  “.
\n“The  quantification  of the commission is not\ta  condition
\nprecedent  to’\tits  accrual.” (Per  Ghulam  Hassan  J.,  in
\nCommissioner  of  Income-tax,  Madras  v. K.  B.  M.  T.  T.
\nThiagaraja  Chetty  and Co.<\/a>(1). See also  Isaac\t Holden\t and
\nSons,  Ltd.  v.\t Commissioners\tof  Inland  Revenue(2),\t and
\nCommissioners  of  Inland Revenue,  v.\tNewcastle  Breweries
\nLtd.(3).  What has however got to be determined\t is  whether
\nthe income, profits or gains accrued to the assessee and  in
\norder  that the same may accrue to him it is necessary\tthat
\nhe must have acquired a right to receive the same or that  a
\nright  to the income, profits or gains has become vested  in
\nhim  though  its valuation may be postponed  or\t though\t its
\nmaterialisation.  may  depend on the  contingency  that\t the
\nmaking\tup  of the accounts would show\tincome,\t profits  or
\ngains.\t The argument that the income, profits or gains\t are
\nembedded  in the sale proceeds as and when received  by\t the
\nCompany\t also  does not help the  transferees,\tbecause\t the
\nManaging  Agents  have\tno share or  interest  in  the\tsale
\nproceeds received as such.  They are not co-sharers with the
\nCompany\t and no part of the sale proceeds belongs  to  them.
\nNor is there any ground for saying that the Company are\t the
\ntrustees  for  the  business or any of the  assets  for\t the
\nManaging  Agents.  The Managing Agents cannot  therefore  be
\nsaid to have acquired a
\n(1)  24 I.T.R. 525. at P. 534.\n<\/p>\n
(2)  12 Tax Cases 768.\n<\/p>\n
(3) 12 Tax Cases 927.\n<\/p>\n
349<\/span><\/p>\n
right  to  receive  any\t commission  unless  and  until\t the
\naccounts are made up at the end of the year, the net profits
\nascertained and the amount of commission due by the  Company
\nto  the Managing Agents thus determined. (See  Commissioners
\nof Inland Revenue v. Lebus(1) ).\n<\/p>\n
It  is cleat therefore that no part of the  Managing  Agency
\ncommission  had accrued to the Sassoons at the dates of\t the
\nrespective transfers of the Agencies to the transferees.
\nThe  two decisions which were sought to be distinguished  by
\nthe  High Court in the judgments under appeal  also  support
\nthis  conclusion.   In the unreported decision of  the\tHigh
\nCourt  of  Bombay  in Commissioner of  Excess  Profits\tTax,
\nBombay\tCity  v.  Messrs.   P. N.  Mehta  and  Sons(1),\t the
\nManaging Agency Agreement was couched in the very same terms
\nas that of the E. D. Sassoon United Mills Company Ltd.\t The
\nManaging  Agents  were to be paid 10 per cent.\tof  the\t net
\nannual profits made by the Company with a guaranteed minimum
\ncommission of Rs. 15,000 per annum.  The accounting year  of
\nthe  Company was the calendar year.  The Tribunal  had\theld
\nthat  the annual profits could only be ascertained when\t the
\naccounts  of the Company were made up and it was  then\tthat
\nthe  10\t per cent. commission would accrue to  the  Managing
\nAgents.\t  The contention of the Department was that  as\t the
\nManaging  Agents worked as such from day to day\t and  helped
\nthe  Company to earn profits, profits accrued to  them\tfrom
\nday to day and not at the end of the year.  This  contention
\nwas negatived by the High Court :-\n<\/p>\n
“It  is only on net annual profits that the Managing  Agents
\nare  entitled to any commission.  A Company may have  worked
\n‘for  six months at a loss, for the remaining six months  it
\nmay make a large profit so as to wipe off the loss, and have
\na net profit to show.  It is only as a result of the working
\nof the Mills for the whole year that it will be possible  to
\nascertain  whether the Mills have worked at a loss or  at  a
\nprofit,\t and what the profit was.  Therefore,  the  Managing
\nAgents\tare only entitled to a commission on the  result  of
\nthe
\n(1)  [ 1946] i A.E.R. 476 ; S.C. 27 Tax Cases 136.
\n(2)  [1950] I.T.Ref. No. 19 Of 1950.\n<\/p>\n
350<\/span><\/p>\n
working of the Mills for a whole year.\tIf the working shows
\na  net annual profit which gives them a commission  of\tmore
\nthan  Rs.  15,000  on the basis of 10 per  cent.,  they\t are
\nentitled  to  that  amount.  If, on  the  ,other  hand,\t the
\nworking\t does  not show a profit, which entitles them  to  a
\ncomnission  of Rs. 15,000 they are in any case\tentitled  to
\nthat amount.  Therefore in our opinion, the Tribunal rightly
\nheld  that the accrual of the commission was at the  end  of
\nthe  calendar  year, which was the year\t maintained  by\t the
\nMills and not from time to time as contended by the  Depart-
\nment.”\n<\/p>\n
In the case of Salt and Industries Agencies Ltd., Bombay  v.
\nCommissioner  of Income-tax, Bombay City<\/a>(1),,  the  question
\nfor the consideration of the Court no doubt was what was the
\nplace  where  the profits had accrued.\tIn  determining\t the
\nplace where the profits had accrued it was however necessary
\nto find when the profits had accrued to the assessee and  it
\nwas  held  that, what was conclusive of the matter  was\t the
\nconsideration  as to when the right to Managing Agency\tcom-
\nmission arose and when did the Company become liable to\t pay
\nManaging Agency commission to the Managing Agents and it was
\nfurther\t held that it was only when all the accounts of\t the
\nworking of the Company were submitted to the head office  in
\nBombay\tand the profit was determined that it could be\tsaid
\nthat  a right to receive a commission at the rate  specified
\nin the Managing Agency Agreement had arisen and the Managing
\nAgents\tbecame entitled to a certain  specified\t commission.
\nThese  considerations are germane to the question  which  we
\nhave  to decide in these appeals and support the  conclusion
\nwhich we have already arrived at, that the right to  receive
\nthe commission would arise and the income, profits or  gains
\nwould  accrue to the Managing Agents only at the end of\t the
\ncalendar year which was the terminus a quo for the making up
\nof  the accounts and ascertaining the net profits earned  by
\nthe  Company.\tWe fail to see how these  cases\t which\twere
\nrelied\tupon by the Revenue before the High Court could,  be
\ndistinguished in the manner in which it was done.\n<\/p>\n
(i)  iS I.T.R. 58.\n<\/p>\n
351<\/span><\/p>\n
We  were invited by the learned counsel for the Sassoons  to
\napproach  the question from another point of view  and\tthat
\nwas  that what had been transferred by the Sassoons  to\t the
\ntransferees  was  a  source of income,\tviz.,  the  Managing
\nAgency\twhich  was to run for the unexpired residue  of\t the
\nterm.\tIt  was\t urged that where a  source  of\t income\t was
\ntransferred any income which accrued from that source  after
\nthe date of the transfer was the transferees’ income and not
\nof  the transferors, and that it was immaterial (a) that  at
\nthe date of the transfer there was an expectation that at  a
\nfuture date income would accrue, (b) that the transferor  by
\nthe work before the transfer had contributed to -create\t any
\nincome which might eventually accrue and (c) that because of
\nthe  expectation of income a higher price had been paid\t for
\nthe transfer.\n<\/p>\n
Reliance  was  placed  in this connection  on  the  case  Of
\nCommissioners  of  Inland Revenue v. Forrest (1).   In\tthat
\ncase  the  assessee  purchased certain shares  on  the\t25th
\nNovember,  1919,  and paid an excess price ”  to  cover\t the
\nportion\t of the dividend accrued to date.” A dividend of  10
\nper cent. for the period ending on 28th February, 1920,\t was
\ndeclared  on  the  13th May, 1920.  The\t contention  of\t the
\nassessee was that the dividend should be treated as  capital
\nin  view  of the terms of the contract of purchase  and\t not
\nincluded  in  the  computation of  his\tincome.\t  Under\t the
\nprovisions  of\tthe Incometax Act the dividends\t which\twere
\nreceivable  by\thim  ‘were required to be  included  in\t the
\ncomputation  of\t his  income.  The  learned  Judges  however
\ndiscussed  the\tlegal effect of such a\ttransaction  of\t the
\npurchase of shares.  Lord Ormidale observed at page 709:-
\n ” The value of the shares had to be determined as a  matter
\nof  bargain between the parties, and the  purchaser  thought
\nthat  it was not unreasonable that he should  pay  something
\nover  par  for\tthem because of\t the  possibility,  not\t the
\ncertainty  but\tthe possibility, of a  dividend\t six  months
\nafterwards being paid upon the shares so purchased by him.”
\nLord Anderson observed at page 710:-\n<\/p>\n
(i)  8 Tax Cases 704.\n<\/p>\n
352<\/span><\/p>\n
He  buys two things with his money.  He buys, in  the  first
\nplace,\ta  share  of the assets of  the\t industrial  concern
\nproportionate  to  the\tnumber\tof  shares  which  he\that;
\npurchased; and he also buys the right to participate in\t any
\nprofits which the Company may make in the future.  Now, when
\na  transaction\tof this nature\tis entered into\t during\t the
\ncurrency of the financial year of the industrial concern  it
\nis  obvious  that what happens is this, that not only  is  a
\npart  of the assets purchased outright but that a chance  is
\nbought as well-a chance of sharing in any profits which\t may
\nbe made during the currency of that financial year.”
\nWigmore (H.  M. Inspector of Taxes) v., Thomas Summerson and
\nSons, Limited (1) was the case of a vendor of war loan stock
\nbearing interest payable without deduction of tax.  The sale
\nwas effected on the 10th April, 1923, with interest  rights.
\nThe  vendor was assessed for the year 1923-24 in respect  of
\nthe amount of interest said to have accrued on the stock  in
\nthe  period  between the last payment of interest.  and\t the
\nsale  of  the  stock,  it being\t contended  that  the  price
\nreceived  by  the  vendor on sale  of  stock  included\tthis
\ninterest.  The purchasers said that they were not liable  to
\ntax in respect of the income which had been accruing on\t the
\nsecurity they had purchased in a period anterior to the date
\non which they purchased.  It was observed that the truth  of
\nthe matter was that the vendor did not receive interest\t and
\ninterest was the subject-matter of the tax.  But he received
\nthe  price  of an expectancy of interest which was  not\t the
\nsubject\t of taxation.  It was not argued that  the  interest
\naccrued\t de  die  in  them  and\t the  vendor  was  held\t not
\nassessable in respect of the interest accrued at the date of
\nthe sale of the stock.\n<\/p>\n
Commissioners of Ihland Revenue v. Pilcher (2) was the\tcase
\nof  the\t gale of an orchard inclusive of  the  year’s  fruit
\ncrop.\tThe assessee had valued the cherries which  were  on
\nthe  trees at pound 2,500 and had pat a man  immediately  in
\nthe  orchard after he had purchased it at the. auction.\t  He
\ncommenced  to  pick  the fruit on the 25th  May,  1942,\t and
\ncompleted the operations on the\n<\/p>\n
(i) 9 Tax Cases 577.\n<\/p>\n
(2) 3 i Tax Cases 314.\n<\/p>\n
353<\/span><\/p>\n
12th  June, 1942.  He realised pound, 2,903 as the price  of
\nthe cherries.  This sum was brought into the profit and loss
\naccount\t as  a\ttrading receipt and the\t contention  of\t the
\nassessee  was that in computing his profits he was  entitled
\nto charge the sum of i 2,500 being the purchase price of the
\ncherries  sold\tfor pound 2,903 which sum had  been  brought
\ninto  credit  as  a trading receipt.   This  contention\t was
\nnegatived  and\tit was observed by Lord Justice\t Jenkins  at
\npage 332 —\n<\/p>\n
” It is a well settled principle that outlay on the purchase
\nof  an\tincome- bearing asset is in the\t nature\t of  capital
\noutlay,\t and  no part of the capital so laid  out  can,\t for
\nincome-tax  purposes,  be  set off  as\texpenditure  against
\nincome accruing from the asset in question.”
\nThere is a further passage in the judgment of Jenkins L.  J.
\nat  page  335  which  is  very\tinstructive.   It  had\tbeen
\ncontended  that the revenue should look at  the\t transaction
\nfrom the assessee’s point of view and should consider it  in
\na manner favourable to him.  This contention was dealt\twith
\nin the manner following:-\n<\/p>\n
One  has  to remember that this\t transaction  concerned\t not
\nmerely Mr. Pilcher but also the vendor of the orchard.\t Mr.
\nPilcher\t was  able  to buy the\torchard\t complete  with\t the
\ncherries from the vendor and by that means, according to his
\nown calculation, the cherries stood him in pound 2,500.\t  It
\nby  no means follows that if he had been minded to  buy\t the
\ncherries from the vendor apart from the land, as a  separate
\ntransaction, the vendor would have been willing to sell them
\nto him for pound 2,500, or at any price.  The difference  is
\nobviously  a  material one from the vendor’s point  of\tview
\nbecause, dealing with the matter as he did, he was selling a
\ncapital\t asset,\t and the resulting  capital  receipt,  prima
\nfacie,\twould  attract\tno tax.\t If  he\t sold  the  cherries
\nseparately in the way of trade he would at once have created
\nan income receipt on which, prima facie, tax would have been
\nexigible.   Therefore  the  alteration in the  form  of\t the
\nbargain required to make it more favourable to Mr.  Pilcheer
\nfrom the tax point of view would have involved an alteration
\nnot  merely  of form but of substance owing to\tits  adverse
\neffect on 46
\n354<\/span>
\nthe  tax situation of the vendor, and it cannot\t be  assumed
\nthat  the bargain thus altered would have been one to  which
\nMr. Pilcher could have secured the vendor’s agreement.”
\nThese observations throw considerable light on the situation
\nobtaining,in  the  cases before us.  It will  be  remembered
\nthat  the  total  amount of Rs. 75,77,693  received  by\t the
\nSassoons on the transfers of the Managing Agencies was taken
\nby  them to the ” Capital Reserve Account.” No part of\tthat
\namount was treated by them as a receipt of income and it  is
\ndebatable  whether  any\t part of the same  could  have\tbeen
\nallocated as a receipt of income even though the transferees
\nhad  desired  to do so.\t All that the  transferees  obtained
\nunder  the deeds of assignment and transfer executed by\t the
\nSassoons  in  their  favour  was  an  income  bearing  asset
\nconsisting  of the office of Managing Agents,  the  Managing
\nAgency\tAgreement  and all the rights and benefits  as\tsuch
\nManaging  Agents  under the Agreements and no  part  of\t the
\nconsideration paid by the transferees to the Sassoons  could
\nbe  allocated  as  a receipt of income by  reason  of  their\n<\/p>\n
-contribution  towards the earning of the commission in\t the
\nshape of services rendered by them as Managing Agents of the
\nCompanies  for\tthe broken periods.   What  the\t transferees
\nobtained under the deeds of assignment and transfer was\t the
\nexpectancy  of\tearning\t a commission in the  event  of\t the
\ncondition  precedent by way of complete performance  of\t the
\nobligation of the Managing Agents under the Managing  Agency
\nAgreements  being fulfilled and a debt arising in favour  of
\nthe  Managing  Agents at the end of the\t stated\t periods  of
\nservice contingent on the ascertainment of net profits as  a
\nresult\tof  the working of the Company during  the  calendar
\nyear.\n<\/p>\n
The  last  case\t to which we were referred  by\tthe  learned
\ncounsel\t for  the Sassoons was The City of  London  Contract
\nCorporation, Limited v. Styles (Surveyor of Paxes) (1).\t The
\npart of the business taken over by the assessee in that case
\nconsisted of unexecuted and partly executed contracts.\t The
\ncontracts  were executed after the date of the\tpurchase  by
\nthe assessee and the
\n(1)  2 Tax cases. 239,
\n355<\/span>
\nassessee  sought to deduct the price paid for the  contracts
\nfrom  the  profits  arising from  their\t performance.\tThis
\ndeduction  was\tnot  allowed  because  whatever\t price\t the
\nassessee  paid for the purchase of the business was  treated
\nas  the capital which had been invested for the\t purpose  of
\nacquiring  that business and the assessee could\t not  deduct
\nfrom  the -net profits of the working of the business  after
\nthe  date of the purchase any part of the capital which\t had
\nbeen  thus  invested by it.  This result was  achieved\teven
\nthough\tin  the purchase of unexecuted contracts  there\t was
\nincluded  the part of the work done towards the\t performance
\nof  the contracts by the vendors.  The assessee derived\t the
\nbenefit from such partial execution of the contracts by\t the
\nvendors; nevertheless the value of such work was not treated
\nas  any income which  had accrued to the vendors  and  which
\nthe assessee was entitled to deduct from its profits arising
\nfrom the performance by it of those unexecuted contracts.
\nLearned counsel on behalf of the transferees contended\tthat
\nall these cases were concerned with the question whether the
\nincome\tderived\t by the assessee out of the  income  bearing
\nasset  after the date of the purchase could be treated as  a
\ncapital\t expenditure  so  far  as  it  formed  part  of\t the
\nconsideration  paid  by the assessee to the vendors  and  in
\nnone  of  these\t cases were the Courts\tconcerned  with\t the
\nquestion  that arises before us, viz., whether any  part  of
\nthe  income  which was actually received  by  the  assessees
\ncould  be said to have accrued to the vendor.\tEven  though
\nthe  question  did  not arise in  terms\t it  is\t nonetheless
\ninvolved  in the consideration of the question\twhether\t the
\nassessee  was liable to pay the income-tax on the  whole  of
\nthe  income  thus  derived by him.  As was  pointed  out  by
\nJenkins\t L.  J.\t in Commissioner of Inland  Revenue  and  v.
\nPilcher(1), quoted above, the vendor’s point of view  cannot
\nbe  neglected and once you come to the conclusion  that\t the
\nassesse\t alone\tis liable it necessarily  follows  that\t the
\nvendor\tcertainly  has nothing to do with the same.   If  it
\nwere  otherwise the vendor would certainly be liable to\t tax
\nand no purchaser would miss the opportunity of avoiding\t his
\nliability for that portion of\n<\/p>\n
(i)  31 Tax Cases 314 at P. 335.\n<\/p>\n
356<\/span><\/p>\n
the income which can be said to have accrued to the  vendor.
\nAs  a  matter  of fact such a contention was  taken  by\t the
\npurchasers  in Wigmore (H.M. Inspector of Taxes)  v.  Thomas
\nSummerson  and\tSons Limited(1), where they declined  to  be
\nassessed  for  tax  in\trespect of  income  which  had\tbeen
\naccruing  on the securities they had purchased in  a  period
\nanterior  to  the  date at which they  did  purchase.\tThis
\ncontention however did not prevail and the vendors were held
\nnot  assessable\t in respect of the interest accrued  on\t the
\ndate of the sale of the stock.\n<\/p>\n
It  is therefore clear that the Sassoons had not earned\t any
\nincome for the broken periods nor had any income accrued  to
\nthem  in respect of the same, and what they  transferred  to
\nthe transferees under the respective deeds of assignment and
\ntransfer  did not include any income, which they had  earned
\nor  had accrued to them and which the transferees by  virtue
\nof  the\t assignment in their favour were in  a\tposition  to
\ncollect.  If any debt had accrued due to the Sassoons by the
\nrespective Companies at the dates of respective transfers of
\nManaging  Agencies such debt would certainly have  been\t the
\nsubject-matter\tof assignment.\tBut it what was\t transferred
\nby  the Sassoons, to the respective transferees were  merely
\nexpectations  of earning commission and not any part of\t the
\ncommission  actually earned by them or which had accrued  to
\nthem under the terms of the Managing Agency Agreements, what
\nthe transferees received from the Companies under the  terms
\nof   the   Managing  Agency  Agreements\t which\t were\tthus
\ntransferred  to\t them would be their income and no  part  of
\nsuch  income  could  ever be said to  have  accrued  to\t the
\nSassoons, during the chargeable accounting period.
\nIn  view  of the above it is unnecessary to  deal  with\t the
\ncontention  which was urged by the learned counsel  for\t the
\nSassoons  that ever be an assignment of income the  assignee
\nand  not  the assignor would be liable to pay the  tax.\t  He
\nreferred  us to the case of the Commissioner of\t Income-tax,
\nBombay\tPresidency v. Tata Sons Ltd.<\/a>(2), in support of\tthis
\ncontention  of\this and he also referred us to note  ‘G’  at
\npage 209 in\n<\/p>\n
(i) 9 Tax Cases 577.\n<\/p>\n
(2) [1939] 7 I.T.R. 195.\n<\/p>\n
357<\/span><\/p>\n
Simon’s\t Income-tax, 2nd Edn., Vol.  II, where the ratio  of
\nParkins v. Warwick (H.M. Inspector of Taxes)(1), relied upon
\nby  the High Court in the judgments under, appeal  has\tbeen
\ncriticised.  We do not however think it necessary to go into
\nthis question, as in our opinion there were no debts due  by
\nthe Companies to the Sassoons which were assigned under\t the
\nrespective deeds of transfer and assignment.
\nThe  only  question  which remains to  consider\t is  whether
\nsection\t 36  of\t the Transfer of Property  Act\timports\t the
\nprinciple  of  apportionment  in regard\t to  the  commission
\nreceived  by  the  transferees herein.\tSection\t 36  of\t the
\nTransfer  of  Property\tAct provides-“In the  Absence  of  a
\ncontract  or  local  usage  to\tthe  contrary,\tall   rents,
\nannuities, pensions, dividends and other periodical payments
\nin  the\t nature of income shall, upon the  transfer  of\t the
\ninterest of the person entitled to receive such payments, be\n<\/p>\n
-deemed,  as between the transferor and the  transferee,  to
\naccrue\tdue  from  day\tto  day,  and  to  be  apportionable
\naccordingly, but to be payable on the days appointed for the
\npayment\t thereof.” It may be noted that the section  applies
\nin the absence of a contract or local usage to the  contrary
\nand   also  applies  as\t between  the  transferor  and\t the
\ntransferee.   There is no room for the application of  these
\nprovisions  as between the subject and the Crown. (Vide\t The
\nCommissioners\t of    Inland\tRevenue\t   v.\t Henderson’s
\nExecutors(2)).\t The  contract\tto  the\t contrary  must\t  of
\nnecessity  be as between the transferor and  the  transferee
\nand  it\t is  only  when there is no  such  contract  to\t the
\ncontrary that the rents, annuities, pensions, dividends\t and
\nother  periodical  payments in the nature of  income  become
\napportionable  as  between the\ttransferor  and\t transferee,
\ndeemed\tto accrue due from day to day and  be  apportionable
\naccordingly.  The deeds of assignment and transfer  executed
\nby the Sassoons in favour of the transferees transferred all
\nthe  rights and benefits under the Agency Agreement  to\t the
\ntransferees  and there was no question of  apportionment  of
\nany commission between the Sassoons and the transferees.  In
\nfact the transfer claimed to retain and did retain
\n(1) [I943] 25 Tax,  419.\n<\/p>\n
(2) i6 Tax CaseS 282 at P. 291,
\n358<\/span>
\nthe  whole  of the commission, which had been  paid  by\t the
\nCompanies  to them in the year 1944 and the  Sassoons  never
\nclaimed\t any  part  of it as having  been  earned  by  them.
\nWhatever was their contribution .towards the earning of that
\ncommission  during the whole of the calendar year  1943\t was
\nthe  subjectmatter  of\tthe  assignment\t in  favour  of\t the
\ntransferees and that was sufficient to spell out a  contract
\nto the contrary as provided in section 36 of the Transfer of
\nProperty Act.\n<\/p>\n
Section\t 26(2)\tof the Indian Income-tax Act also  does\t not
\nhelp  the  transferees because it is only  when\t the  person
\nsucceeded has acquired an actual share of the income profits
\nor  gains of the previous year that he is liable to  tax  in
\nrespect\t of  it and as set out herein above no part  of\t the
\ncommission  actually accrued to or became a debt due by\t the
\nCompany\t to  the  Sassoons on the dates\t of  the  respective
\ntransfers  of the Managing Agencies to the transferees.\t  In
\norder  to attract the operation of section 26(2) the  person
\nsucceeded  must\t have  had an actual share  in\tthe  income,
\nprofits\t  or  gains  of\t the  previous\tyear  and   on\t the
\nconstruction  of the Agreements the Sassoons cannot be\tsaid
\nto  have  acquired any share in commission  for\t the  broken
\nperiods.\n<\/p>\n
The whole difficulty has arisen because the High Court could
\ncould  not  reconcile  itself  to  the\tsituation  that\t the
\ntransferee  had not worked for the whole calendar  year\t and
\nyet  they would be held entitled to the whole income of\t the
\nyear  of account; whereas the transfers had worked  for\t the
\nbroken periods and yet they would be held disentitled to any
\nshare  in the income for the year.  If the work done by\t the
\ntransferors as well as the transferees during the respective
\nperiods\t of  the, year were taken to be\t the  criterion\t the
\nresult\twould  certainly be anomalous.\tBut  the  true\ttest
\nunder  section 4(1)(a) of the Income-tax Act is not  whether
\nthe  transferors  and  the transferees had  worked  for\t any
\nparticular  periods of the year but whether any\t income\t had
\naccrued\t to the transferors and the transferees\t within\t the
\nchargeable  accounting period.\tIt is not the work  done  or
\nthe services rendered by the person but the income
\n359<\/span>
\nreceived  or  the  income which has accrued  to\t the  person
\nwithin the chargeable accounting period that is the subject-
\nmatter\tof taxation.  That is the proper method of  approach
\nwhile considering the taxability or otherwise of income\t and
\nno  considerations  of the work done for broken\t periods  or
\ncontribution  made towards the ultimate income derived\tfrom
\nthe  source of income nor any equitable\t considerations\t can
\nmake any difference to the position which rests entirely  on
\na strict interpretation of the provisions of section 4(1)(a)
\nof the Income-tax Act.\n<\/p>\n
The  result therefore is that the question referred  by\t the
\nTribunal to the High Court must be answered in the negative.
\nAll the appeals will accordingly be allowed.  But as regards
\nthe costs, under the peculiar circumstances of these appeals
\nwhere the Commissioner of Income-tax, Bombay, has  supported
\nthe Sassoons in Civil Appeal No. 3 of 1953 and the brunt  of
\nthe  attack in Civil Appeals Nos. 30 of 1953 and 31 of\t1953
\nhas been borne not by the Commissioner of the Income-tax who
\nis  the appellant in both, but by the Sassoons,\t the  proper
\norder  should  be that each party should bear  pay  his\t own
\ncosts here as well as in the Court below
\nJAGANNADHADAS  J.-I  am unable to agree with  the   judgment
\njust delivered on behalf of both my learned brothers.  It is
\nwith considerable regret that I feel constrained to write  a
\nseparate  judgment expressing the reasons for my -not  being
\nable to agree with them in spite of my profound respect\t for
\ntheir views.\n<\/p>\n
These  three  are appeals against a judgment of\t the  Bombay
\nHigh  Court  by leave granted under section  66A(2)  of\t the
\nIndian\tIncome-tax  Act.  They arise out of a set  of  facts
\nmostly\tcommon.\t  E.  D. Sassoon and Company,  Ltd.  now  in
\nvoluntary  liquidation\t(hereinafter  referred\tto  as\t the
\nSassoonal  had the Managing Agency of three Mills  (1)\tF.D.
\nSassoon\t United Mills Ltd. (2) Elphinstone Spinning  and  We
\nhaving\tMills Company, Ltd., and (3) The Apollo\t Mills\tLtd.
\nWith the
\n360<\/span>
\nconsent\t of the Mill Companies and by virtue of\t clauses  in
\nthe  Managing  Agency  Agreements  enabling  thereunto,\t the
\nSassoons transferred the Managing Agency of the three  Mills
\nto  three other Companies during the course of the  calendar
\nyear  1943  as\tfollows: (1) to Agarwal\t and  Company,\tLtd.
\n(hereinafter  referred to as Agarwals) on the 1st  December,
\n1943,\t(2)   to  Chidambaram  Mulraj  and   Company,\tLtd.
\n(hereinafter  referred to as Chidambarams) on the  1st\tJune
\n1943,  and (3) to Rajputana Textile (Agencies) Ltd., on\t the
\n1st july, 1943.\t The assessments with which we are concerned
\nare  those  of (1) Sassoons, (2) Agarwals, and\t(3)  Chidam-
\nbarams\tand  relate  to income by  way\tof  Managing  Agency
\nremuneration paid in the year 1944 by the Mill Companies  to
\nthe  respective\t assignee-Companies for\t the  calendar\tyear
\n1943.\tFor  Sassoons and Agarwals the assessment  year\t was
\n1944-45 and the accounting year was the calendar year  1943.
\nFor  Chidambarams  the assessment year was 1945-46  and\t the
\nchargeable  accounting\tperiod was from 1st July,  1943,  to
\n30th  June, 1944.  The tax was assessed on the basis not  of
\nreceipts but of accrual.  The income-tax authorities treated
\nthe total remuneration for the entire year 1943 in each case
\nas  income  which accrued to the  assigneeCompanies  in\t the
\nrespective   accounting\t periods.   The\t  assignee-Companies
\nobjected on the ground that part of the remuneration, up  to
\nthe  date  of  the respective assignments,  accrued  to\t the
\nassignor-Company,   viz.,  Sassoons  and  that\tthey   were,
\ntherefore,  liable  to be assessed only in  respect  of\t the
\nbalance of the remuneration referable to the portion of\t the
\ncalendar year 1943 subsequent to the respective dates of the
\nassignments.\tThe   objection\t was   overruled   and\t the
\nassessments  were  made.   On  appeals\tto  the\t  Income-tax
\nAppellate  Tribunal, their contention was accepted  and\t the
\nassessments  were  modified.  It may be mentioned  that\t the
\nRajputans  Textiles (Agencies) Ltd. does not appear to\thave
\nfiled any appeal to the Tribunal.  Meanwhile (presumably  by
\nway of caution) the income-tax authorities issued notices to
\nthe  assignor-Company, viz., Sassoons, under section  34  of
\nthe Indian Income-tax Act and assessed it in respect of\t the
\nproportionate part
\n361<\/span>
\nof  the year’s Managing Agency commission up to the date  of
\nthe  respective assignments.  The Sassoons objected to\tthis
\nbefore\tthe  income-tax.authorities, but the  objection\t was
\noverruled.   It has been stated to us in the case  filed  by
\nthe Sassoons in this Court that the entire net consideration
\nfor  the  three\t assignments was taken by  them\t into  their
\naccounts  as capital reserve.  But this finds no mention  in
\nthe Tribunal’s statement of the case to the High Court.\t How
\nthe  Sassoons  made  entries in their own  accounts  is\t not
\ndecisive  and  has not been relied on before us.   On  their
\nobjection  being overruled, the Sassoons filed an appeal  to
\nthe  Income. tax Appellate Tribunal.  The Tribunal  rejected
\nthe appeal in view of the decision they had already given in
\nthe  appeals filed by the two  assignee-Companies,  Agarwals
\nand  Chidambarams.  The three Companies\t concerned  obtained
\nreferences to the High Court under section 66 of the  Indian
\nIncome-tax  Act.  The question referred by the\tTribunal  in
\neach of the three cases was the same and is as follows:
\n” Whether in the circumstances of the case; was the Managing
\nAgency\tcommission  liable  to be  apportioned\tbetween\t the
\nassessee Company and the assignee (or assignor, as the\tcase
\nmay be).”\n<\/p>\n
The  High Court answered the question against  the  Sassoons
\nand  in favour of the other two.  What the High\t Court\theld
\nwas  in substance that (1) the Managing Agency\tremuneration
\nfor the year in question accrued as the joint income of both
\nthe assignor and the assignee and was apportionable  between
\nthem, and (2) the assignee-Companies received the assignor’s
\nshare  of the joint income by virtue of the  assignments  of
\nthe  assignor’s\t share and hence to that extent it  was\t not
\ntheir taxable income but continued to be the taxable  income
\nof  the assignor’ There are thus three appeals, one  by\t the
\nSassoons  against the Income-tax Commissioner and the  other
\ntwo  by\t the Income-tax Commissioner  against  Agarwals\t and
\nChidambarams respectively.  In the first of the appeals, the
\nIncome-tax  Commissioner supports the position taken up\t by-
\nthe Sassoons, while in the other two the Commissioner is the
\nappellant and contests the position taken by the
\n47<\/span>
\n362<\/span>
\nAgarwals  and the Chidambarams.\t Thus it will be  seen\tthat
\nthough\tin  form  the three appeals  are  each\tbetween\t the
\nIncome-tax  Commissioner and one of the three Companies,  in
\nfact they raise a controversy between the  assignor-Company,
\nthe  Sassoons,\ton  the\t one  side  and\t the  two  assignee-
\nCompanies,  the Agarwals and the Chidambarams on the  other,
\nthe  Commissioner supporting the Sassoons and  opposing\t the
\nother two.\n<\/p>\n
The  arguments\tbefore\tus covered a  wide  range  and\twere
\nadvanced on the assumption that what the High Court held was
\nthat  the Sassoons became entitled on the. very date of\t the
\nrespective  assignments\t to  a proportionate  share  of\t the
\nyear’s\tremuneration  for  the\tManaging  Agency,  and\tthat
\naccordingly  that  share accrued to the\t Sassoons  as  their
\ntaxable income, then and there, and did not cease to be such
\nnotwithstanding\t  the  assignment  thereof  The\t  case\t was
\naccordingly debated before us as though the decision  turned
\nupon  the  question whether any income could accrue  to\t the
\nSassoons  on  the dates of the respective transfers  of\t the
\nManaging  Agency  to  the  transferees.\t  It  is  necessary,
\ntherefore, to clarify, at the outset, what the question\t was
\nwhich was directly raised on the reference made to the\tHigh
\nCourt and what, in the view of the High Court, was the\tdate
\nWhen  a\t share\tof the year’s remuneration  accrued  to\t the
\nSassoons as its income.\t It appears to me that the  judgment
\nof the High Court taken as a whole is based only on the view
\nthat  the entire Managing Agency remuneration for  the\tyear
\naccrued\t on the completion of ‘the year, i.e., on  the\t31st
\nDecember, 1943, and that when it so accrued it accrued\tboth
\nto the assignor and to the assignee together.  This  appears
\nfrom  the  following passage of the judgment  of  the  High.
\nCourt.\n<\/p>\n
”  In order to levy income-tax it is not enough\t to  enquire
\nwhen  a particular income accrues.  What is  more  important
\nand what is more pertinent is to enquire whose income it  is
\nwhich is sought to be taxed.  Assuming that this  particular
\nincome\taccrued on the 31st December and till 31st  December
\nthere  was  nothing earned, even so, when. the\tincome\tdoes
\naccrue the question still remains to be answered as to whose
\n363<\/span>
\nincome it is which has accrued on the 31st December, 1943.”
\nIt  appears  to\t me also that it is on the  footing  of\t the
\naccrual\t on the completion of the year that the\t High  Court
\ndealt  with  the question of assignment of  the,  income  as
\nappears from the following passage:\n<\/p>\n
”  And\tclearly one of the rights which E.  D.\tSassoon\t and
\nCompany,  Ltd.\thad, was to receive  the  Managing.   Agency
\ncommission  (share  therein  ?)\t when  it  accrued  on\t31st
\nDecember………….. They transferred that right.”
\nFrom  these  passages it appears to me clear that  the\tHigh
\nCourt  proceeded on the view that income accrued at the\t end
\nof  the\t year to both together and that what passed  to\t the
\nassignee under the assignment included a future right of the
\nassignor to a share in the remuneration, when it accrued  on
\nthe  completion\t of the year, and not on the view  that\t the
\nassignment  operated as the transfer of a present  right  to
\nsuch  a share on the very date of the assignment.  It is  in
\nview  of the assumption that the remuneration for  the\tyear
\naccrued\t only  on  the 31st  December  that  the  Income-tax
\nAppellate  Tribunal also took care to say, in  making  their
\nreference to the High Court, as follows:\n<\/p>\n
”  The question is not when the Managing  Agency  commission
\naccrued.  The real question is to whom it accrued.”
\nIt  appears  to\t me, therefore, that it is  not\t correct  to
\napproach  the  consideration  of this case  as\tthough,\t the
\ndecision  therein turns directly upon the  question  whether
\nany  income had accrued to the Sassoons on the dates of\t the
\nrespective   transfers\tof  the\t Managing  Agency   to\t the
\ntransferees.\n<\/p>\n
In the arguments before us, considerable stress was laid  by
\nlearned counsel appearing for the Sassoons on the fact\tthat
\nthe  Managing Agency Agreements with which we are  concerned
\nprovide for annual remuneration for an year’s work.  It\t was
\npointed\t out  that  the remuneration payable  was  fixed  as
\ncommission  at\ta certain specified percentage\tof  the\t net
\nprofits\t of  the respective Mill Companies.  So far  as\t the
\nSassoons  United Mills Ltd., are concerned,  whose  Managing
\nAgency had been
\n364<\/span>
\nassigned to Agarwals, the commission was in terms stated  in
\nthe  Agency Agreement to be per annum and on the annual\t net
\nprofits of the Company.\t So far as Elphinstone Spinning\t and
\nWeaving\t Mills Company,Ltd., are concerned,  whose  Managing
\nAgency\twas assigned to Chidambarams., the remuneration,  is
\nmerely\tstated\tin  the\t corresponding\tAgreement  to  be  a
\npercentage of the net profits of the company, but is not  in
\nterms  stated to be per annum or on the annual net  profits.
\nBut  there  can be no reasonable doubt that as a  matter  of
\nconstruction, the remuneration in the latter case also\tmust
\nbe  taken  to be per annum and on the  annual  net  profits,
\nnotwithstanding\t some  argument before us to  the  contrary.
\nHaving\tregard\tto this basic fact, the\t following  are,  in
\nsubstance,  the arguments put forward before us\t by  learned
\ncounsel\t for the assignor-Sassoons. (1) The Managing  Agency
\ncommission was payable in respect of services for an  entire
\ncalendar year and not for a portion thereof and therefore no
\ncommission  became  due\t to the Sassoons  for  the  services
\nrendered by them to the respective Mill Companies for broken
\nperiods\t of  the  year up to the  dates\t of  the  respective
\nassignments. (2) Since no remuneration became a debt due  to
\nthe Sassoons from any of the Mill Companies on the dates  of
\nthe  respective\t assignments, no taxable income\t accrued  to
\nthem  for  the\tbroken\tperiods. (3) By\t the  dates  of\t the
\nrespective  assignments,  the  Sassoons\t had  only  a\tbare
\nexpectancy,  if any, to receive remuneration for the  broken
\nperiod\tand this expectancy could not be the  subject-matter
\nof  any\t assignment,  and  (4)\tThe  true  legal   position,
\ntherefore,  is that what was assigned was an income  bearing
\nasset,\tviz.,  the Managing Agency which was the  source  of
\nincome\tand  which  entitled  the  respective  assignees  to
\nreceive all the remuneration for the year payable under\t the
\nManaging Agency Agreement subsequent to the respective dates
\nof assignment.\tAccordingly the same became in its  entirety
\ntaxable income in the hands of the respective assignees\t and
\nno  portion of it accrued at any time as taxable  income  of
\nthe assignor-Sassoons.\n<\/p>\n
In  the view that I take of the High Court’s judgment as  to
\nthe date of accrual of the income and as to
\n365<\/span>
\nthe  scope of the question presented on the  references\t the
\nfirst  three of the above arguments do not appear, to me  to
\ncall  for any examination.  In the present case no  question
\narises\tas  to\tthe  enforceability  of\t the  claim  for   a
\nproportionate  share  of the remuneration by,  the  assignor
\nfrom  the  very date of assignment.  Nor does  any  question
\narise as to the non-payability of remuneration on account of
\nnon-completion\tof  the\t work.\tThe  year’s  work  has\tbeen
\ncompleted by the
\nassignee-Company  in continuation of that of  the  assignor-
\nCompany.   The total remuneration for the year has  in\tfact
\nbeen paid into the hands of the assignee-Company.  The\tonly
\nquestions, therefore, are (1) whether the money so  received
\naccrued\t by  way  of remuneration for the  year’s  work\t and
\nbecame taxable income on the 31st December, 1943, (2) if so,
\nwhether.  it  was the joint income of the assignor  and\t the
\nassignee  or  the,  sole income of  the\t assignee,  and\t (3)
\nwhether\t the assignment operated to transfer the  assignor’s
\nshare of the income on its accrual.\n<\/p>\n
The  answer to the first of the above questions seem$ to  me
\nto  admit of no doubt.\tThe remuneration was for the  year’s
\nwork.\tThe year’s work was completed on the expiry  of\t the
\nyear.\tThe  right  to\treceive\t the  remuneration   became,
\ntherefore,  vested on the 31st December, 1943.\tIt  is\ttrue
\nthat  in Agarwal’s case there is a clause’ in  the  original
\nManaging Agency Agreement that
\n“the  Managing Agency commission shall be due yearly on\t the
\n31  st\tday  of March in each and every year  and  shall  be
\npayable and be paid immediately after the annual accounts of
\nthe Mill Company have been passed, by the shareholders.”
\nIt  has\t been  urged, in reliance on this  clause  that\t the
\naccrual of the income, in so far as the case of Agarwals  is
\nconcerned,  is\tnot on the 31st December, but  on  the\t31st
\nMarch next.  In the first place such a contention in so\t far
\nas it relates to the date of accrual, is not permissible  in
\nview of the clarification in the order of -reference made by
\nthe Tribunal to the High Court and: in view of the  specific
\nand  categorical  language of some’ of the  grounds  in\t the
\nstatements of the case filed.\n<\/p>\n
366<\/span><\/p>\n
before\tus both by Sassoons and the Income-tax\tCommissioner
\nshowing\t 31st December, 1943, as the date of accrual of\t the
\nentire\tremuneration. (Vide paragraphs 19(1), 26(a) and\t (g)
\nof  the Sassoons’ statement, and paragraphs 12,\t 15(1),\t (2)
\nand (5) of the Income-tax Commissioner s statement, in Civil
\nAppeal\tNo.  3\tof 1953).  But even  if\t the  contention  be
\npermissible  and  granting  the view  strenuously  urged  on
\nbehalf of the appellant-Sassoons that there is no accrual of
\nincome\tuntil there exists a right to receive it, I  do\t not
\nthink  that the clause in question has any relevancy so\t far
\nas  the date of accrual of income is concerned.\t Accrual  of
\nincome\tfor  purposes of taxation, does not  depend  on\t the
\nquestion’  -as\tto  when the  income  becomes  payable.\t  It
\ndepends\t only on when a vested right to receive\t the  income
\narises.\t (See  Commissioners of Inland Revenue\tv.  Gardner-
\nMountain  and  D’  Ambrumenil Ltd., (1)).   The\t accrual  is
\naccordingly  complete  when the right  to  the\tremuneration
\nbecomes vested by the occurrence of all the events on  which
\nthe   remuneration   depends.\tA  mere\t clause\t  that\t the
\nremuneration shall be due at a later date,  notwithstanding’
\nthat  all the events on which the remuneration depends\thave
\noccurred,  can\tonly  have  the\t effect\t of  postponing\t the
\nliability  for payment and not of postponing the vesting  of
\nthe  right to income.  The requirement of lapse\t of  further
\ntime  after the occurrence of all the qualifying  events  is
\nnot itself an additional -event which imports any element of
\ncontingency in the right.  It appears to me, therefore, that
\nthe  above  clause which has been relied  upon-whatever\t the
\nreason\tmay be for the distinction which the language  seeks
\nto  suggest between due and payable-can have no\t bearing  on
\nthe  date  of  the accrual and cannot  have  the  affect  of
\npostponing the accrual from the 31st December to 31st March.
\nBut  even otherwise, this does not at all affect. the  final
\nconclusion in this case reached by the High Court of Bombay.
\nIf  the\t view of the High Court is correct  that  the  ncome
\naccrued\t both to the assignor and to the assignee after\t the
\ncompletion  of\tthe year’s work it seems  to  matter  little
\nwhether that accrual is on the 31st December or on the\t31st
\nMarch next.\n<\/p>\n
(1)  29 Tax Cas. 69.\n<\/p>\n
367<\/span><\/p>\n
by the High Court that the assignments operated to  transfer
\nto   the  assignee  the\t assignor’s  share  of\tthe   year’s
\nremuneration  after  it\t accrued to him as  his\t income\t and
\nwhether it continues to remain the assignor’s taxable income
\nin spite of the assignment, may also be shortly dealt  with.
\nIf the High Court be right in its view that the remuneration
\naccrued\t both to the assignor and to the assignee  together,
\nwhenever it may’ be, then it is clear that on the respective
\ndates of the assignment,, the assignor bad a future right to
\na  share of the remuneration on the completion of the  year.
\nIf  so, there is ample authority for the position  that\t the
\nassignment  of\tsuch  a future right is\t valid\tand  becomes
\noperative  by way of attaching itself to the right  when  it
\nsprings\t up.  (See Bansidhar v. Sant Lal (1), Misri  Lal  v.
\nMozhar Hossain (2), Palaniappa v. Lakshmanan (3) and  Baldeo
\nv.  Miller  (4).)  The validity of  such  an  assignment  as
\nbetween the assignor and the assignee and the effect thereof
\non  the assignor’s future right may also be  supported\twith
\nreference  to the principle of estoppel feeding title  which
\nfinds recognition in section 43 of the Transfer of  Property
\nAct.   For  the\t further  position,  ViZ.,  that  a   person
\ncontinues to be liable for tax in respect of accrued  income
\nnotwithstanding\t assignment  thereof operating on  or  after
\nsuch accrual, there is authority in Parkins v. Warwick\t(5).
\nThis  -view  is confirmed by the following passages  in\t the
\nPrivy  Council\tcase  in Pondicherry  Railway  Co.  Ltd.  v.
\ncommissioner of Income-tax, Madras (6).\n<\/p>\n
” Profits on their coming into existence attract tax at that
\npoint  and the revenue is not concerned with the  subsequent
\napplication of the profits.”\n<\/p>\n
The destination of the profits or the charge which has\tbeen
\nmade on those profits by previous agreement or otherwise  is
\nperfectly immaterial.”\n<\/p>\n
(Quoted\t out  of an extract from the case  in  Gresham\tLife
\nAssurance Society v. Styles(7)).\n<\/p>\n
(1)  I.L.R.1o All I33.\n<\/p>\n
(2)  I.L.R. 13 Cal. 262.\n<\/p>\n
(3)  I L.R. 16 Mad. 429.\n<\/p>\n
(4)  I.L R. 31 Cal. 667.\n<\/p>\n
(5)  25 Tax Cases gig.\n<\/p>\n
(6)  A.I.R. 1931 P.C. i65 at 170.\n<\/p>\n
(7)  [I892] A.C. 309.\n<\/p>\n
368<\/span><\/p>\n
clear  recongnition of the principle that when\tonce  income
\naccrues\t to  a person, an assignment  operative\t in  respect
\nthereof, does not affect his taxability for that income.  It
\nmay be mentioned that it is not seriously disputed that\t the
\nconsideration for each assignment included the value of\t the
\nprospective advantage of collecting the remuneration for the
\nentire\t year,\t i.e.,\tin  the\t  sense\t that\tthe   actual
\nconsideration  paid was higher than what it might have\tbeen
\nif  the assignment had taken place at the very\tcommencement
\nof the year.\n<\/p>\n
The  only substantial question, therefore, which  this\tcase
\nraises is whether the view taken by the High Court, that the
\nremuneration  for  the year accrued as income  both  to\t the
\nassignor and the assignee, is correct.\tIt is apparently  as
\nan  answer to this question that learned  counsel  appearing
\nfor  the  Sassoons  put forward the  argument  No.  4  above
\nenumerated, viz., that the assignment of Managing Agency  is
\nthe transfer of an income-bearing asset and that all  income
\nreceived  subsequent to the date of assignment\tis  entirely
\nthe  assignee’s taxable income.\t It is the validity of\tthis
\nargument that now requires examination.\t The cases that have
\nbeen relied on in support of this argument are the following
\n: The Commissioners of Inland Revenue v. Forrest(1); Wigmore
\nv. Thomas Summerson(2); and Commissioners of Inland  Revenue
\nv.   Pilcher(3).    Commissioners  of  Inland\tRevenue\t  v.
\nForrest(1)  is a case of purchase of certain shares and\t the
\nincome derived therefrom and is analogous to the second head
\nof  income chargeable to income-tax under section 6, of\t the
\nIndian\t Income-tax  Act,  viz.,  Securities.\tThe   income
\ntherefrom is directly referable only to the ownership of the
\nshares\tor  securities.\t  Mere lapse of\t time  makes  income
\npayable\t and  the  taxation depends on the  receipt  of\t the
\nincome.\t  Wigmore  v.  Thomas Summerson(2) is  also  a\tcase
\nsimilar to the above.  Commissioners of In. land Revenue  v.
\nPilcher(3) is the case of a sale of an orchard inclusive  of
\nthe  year’s fruit crop, which by the date of the  sale\tdoes
\nnot appear to have become ripe.\n<\/p>\n
(i)  8 Tax Cases 704.\n<\/p>\n
(2)  9 Tax Cases 577
\n\t\t   (3) 3T Tax Cases 314.\n<\/p>\n
369<\/span><\/p>\n
enough to be treated as a severable item of property.\tThis
\nwas  a\tcase  of property whose. ownership  itself,  in\t the
\nordinary  course and by lapse of time, gives rise to  income
\nand  is analogous to head No. 3 of section 6 of’ the  Indian
\nIncome-tax  Act.   It is interesting to note, that  in\tthis
\ncase, the learned Judges make a distinction between  fructus
\nindustriales  and fructus naturales and point out  that\t the
\nfruits\tderived from the orchard being cherries are  fructus
\nnaturales  and\tnot fructus industrials.   That\t the  result
\nmight  have  been different if it was  fructus\tindustriales
\nappears\t clearly, at least so far as Lord Justice  Singleton
\nand Lord Justice Tucker are concerned.\tIn   the   case\t  of
\nfructus industriales the income does\tnot  arise  by\tmere
\nownership but as a result of further\tinvestment\t and
\nlabour\twhich may be the effective source of income.   These
\ndecisions  refer only to cases where the sole  or  effective
\nsource of income is mere ownership and taxability depends on
\nreceipt of the income.\n<\/p>\n
Another\t case that has been relied on before us is the\tCity
\nof  London  Contract Corporation v. Styles(1).\tThat  was  a
\ncase  where  one Company purchased as a\t going\tconcern\t the
\nbusiness  carried on by another Company, as contractors\t for
\npublic works.  It was claimed that the assignee-Company\t was
\nentitled  to  deduction\t from their  taxable  income  for  a
\nportion of the purchase price which may be attributed to the
\npurchase  of  the  right, title and  interest  to,  and\t the
\nbenefit of, certain building contracts of the Company,\tfrom
\nthe execution of which, a portion of the net profits of\t the
\nCompany\t arose.\t This was negatived on the ground  that\t the
\nentire\tpurchase price was capital investment and that\twhat
\nall  was  received  later  on  was  income  derived  by\t the
\nexecution of the contracts so purchased.  This, so far as it
\ngoes, may seem to suggest by implication that there may be a
\npurchase  of  contracts\t yet to be  executed  and  that\t the
\nbenefit of the entire profits therefrom is to be treated  as
\nincome\tin the hands of the purchaser.\tThe report  of\tthis
\ncase,  however,\t does  not  indicate  clearly  whether\t the
\ncontracts,  whose  benefit  was\t purchased  were   partially
\nexecuted and if so, whether the partial execution
\n(1)  2 Tax Cases 239,
\n370<\/span>
\nwas  substantial or negligible.\t The statement of the  facts
\nof  the\t case  at  page 241 of the  report  shows  that\t the
\nbusiness  which\t was  purchased\t consisted  entirely  ”\t  of
\npartially  executed or wholly unexecuted contracts,  and  of
\nthe rights thereunder and the benefits to accrue therefrom.”
\nIf the business consisted of only unexecuted contracts, this
\ncase  is not an authority for the position contended for  on
\nbehalf\tof the Sassoons.  But in any case, even if  some  of
\nthe  contracts were partially executed there is\t nothing  to
\nshow  that the execution was of any such extent as  to\thave
\nbecome a substantial source of income.\tIt may also be noted
\nthat  this  decision is a direct authority only on  what  is
\ncapital expenditure and what is revenue expenditure for pur-
\nposes of deduction.  The point in the form relevant for\t the
\npresent\t case  was not raised there and cannot be  taken  to
\nhave  been  decided.  It is interesting to  notice  that  in
\nSimon’s Income-tax, Vol. 2, (1949 Edn.), page 188, paragraph
\n222, the following passage appears.\n<\/p>\n
”  In City of London Contract Corporation Ltd. v.  Styles(1)
\nwhere the Company acquired a business including a number  of
\nunexecuted contracts, it was held that the sum paid for\t the
\ncontracts  could not be deducted in computing the  Company’s
\nprofits, on the ground that the whole of the purchase  price
\nof  the\t business  was a sum ‘ employed or  intended  to  be
\nemployed as capital in such trade’.”\n<\/p>\n
Similarly in Spicer and Pegler’s Income-tax and\t Profits-tax
\n(20th Edn.), at page 116 it is stated as follows :
\n”  Cost of unexecuted contracts taken over with\t a  business
\n(in  arriving  at the profits from the\tperformance  of\t the
\ncontracts)”\n<\/p>\n
and  the  case\tof City of London  Contract  Corporation  v.
\nStyles(1) is quoted as authority.  These standard  textbooks
\nalso  show  that  this\tcase  has  been\t treated  as  having
\nreference  to  unexecuted contracts (and  not  to  partially
\nexecuted contracts) and as being authority for the  question
\nas to what are Permissible deductions from taxable income of
\nbusiness concerns,
\n(I)  2 Tax CaseS 239.\n<\/p>\n
371<\/span><\/p>\n
The above cases, therefore, cannot be treated as in any\t way
\nsupporting the contention put forward by learned counsel for
\nthe appellant-Sassoons that in the case of an assignment  of
\nManaging Agency the entire remuneration for the year’s\twork
\naccrues\t as a matter of law to the assignee and is his\tsole
\nincome,\t on  the  ground that the Agency is  the  source  of
\nincome\tand that in this respect it is to be treated  as  an
\nincome bearing asset.  No specific authority has been cited’
\nbefore us covering the case of a Managing Agency nor can the
\ncase in City of London Contract Corporation v. Styles(1)  be
\ntreated\t as  an\t authority showing that in the\tcase  of  an
\nassignment of partially executed contracts the\tremuneration
\nor profits relatable to such partial execution is necesarily
\nthe income of the assignee.\n<\/p>\n
The  question thus raised has, therefore, to be examined  on
\nprinciple.   On such examination it appears to me  that\t the
\nargument  advanced in this behalf is based on a\t fundamental
\nmisconception.\t Income\t of  the  kind\twith  which  we\t are
\nconcerned in this case does not arise by virtue of any\tmere
\nownership  of  an asset.  What produces income\tis  not\t the
\nownership of the Managing Agency but the actual work  turned
\nout for the benefit of the principal.  It is not the fact of
\na  Company having obtained the right to work as\t a  Managing
\nAgent  that  produces the income but it\t is  the  continuous
\nfunctioning of the Company, as the Managing Agent, in  terms
\nof the contract of Agency, that produces the income.  Hence,
\nit is the rendering of the service of the Managing Agency or
\nthe  carrying out of the Managing Agency business, which  is
\nthe  effective and direct source of income.  This is not  to
\nsay that work or service is the subject of taxation.  It  is
\nthe remuneration that is the subject of tax and work is\t the
\nsource of the remuneration.  Hence in such a case service or
\nwork  is the source of income and not. the ownership of\t the
\nright  to  work.   The above legal position  has  been\tvery
\nsuccinctly  brought  out by Lord Finlay, though\t in  another
\ncontext,  in John Smith & Son v. Moore(2) in  the  following
\npassage:\n<\/p>\n
(1) 2 Tax Cases -239.\n<\/p>\n
(2) (1921] 2 A.C. I3 at 25.\n<\/p>\n
372<\/span><\/p>\n
“The business makes no profits.\t The profits are not  fruits
\nyielded by a tree spontaneously.  They are the result of the
\noperations carried on by the owner of ‘the business for\t the
\ntime being.”\n<\/p>\n
Therefore, on principle, apart from authority, it appears to
\nme to be erroneous to treat the Managing Agency.   Agreement
\nas by itself the direct source of income and to treat it  as
\nan income-producing asset.\n<\/p>\n
An  examination of the provisions of the  Indian  Income-tax
\nAct  clearly bears out this view.  Sections 3 and 4  of\t the
\nIncome-tax Act are the charging sections.  The charge is (in
\nso far, as it is relevant for purposes of this case) on\t the
\nincome\tof  the previous year (a) which is received  by\t the
\nassessee within the taxable territory, or (b) which  accrued
\nor  arose  within  the\ttaxable\t territory  to\ta   resident
\nassessee.   As\tstated at the outset the assessment  in\t the
\npresent\t case  is  based  on accrual  and  not\ton  receipt.
\nComputation  of\t the  taxable  income  is  governed  by\t the
\nprovisions  of\tChapter III of the Act.\t Section  6  thereof
\nenumerates the following heads of income as being chargeable
\nto income-tax. (1) Salaries, (2) Interest on securities, (3)
\nIncome\tfrom  property, (4) Profits and gains  of  business,
\nprofession or vocation, (5) Income from other sources.\t The
\nresidual item (5) may for the present purposes be left\tout.
\nOf the other four heads, items 2 and 3 are the only items in
\nwhich  the  taxable  income  is\t directly  related  to\t the
\nownership of an asset.\tIn the present case the\t computation
\nof  the taxable income ‘has no relation to those  items\t but
\nmay conceivably fall under head No. 1 or head No. 4. At this
\nstage,\tit is necessary to observe that, though, so far,  in
\nthe above discussion, the Managing Agency has been  referred
\nto  as service and the commission therefor as  remuneration,
\nfor  purposes  of  convenience,\t the  true  nature  of\t the
\nfunctioning  of a Managing Agent, where it is, a firm  or  a
\nCompany, which so functions, has been recently held by\tthis
\nCourt  in  Lakshminarayan  Ram Gopal and Son,  Ltd.  v.\t The
\nGovernment  of\tHyderabad<\/a>(1)  to  be  a\t business  and\t the
\nremuneration  to be income by way of profits or\t gains\tfrom
\nthe business.  The\n<\/p>\n
i)   Civil  Appeals Nos. 292 and 312 Of 1050 of\t the  Suprem
\nCourt of India.\n<\/p>\n
373<\/span><\/p>\n
income,\t therefore;  falls  under head No. 4  and  the\tcom-
\npetation  thereof  has to be made under section\t 10  of\t the
\nIncome-tax  Act.   Sub-section (1) of that section  runs  as
\nfollows:\n<\/p>\n
“The  tax  shall be payable by an assessee  under  the\thead
\nprofits\t and  gains of business, profession or\tvocation  in
\nrespect of the profits or gains of any business,  profession
\nor vocation carried on by him.”\n<\/p>\n
Now, in computing the taxable income of the assignee, can it
\nreasonably be said that the remuneration for the entire year
\nis the income of the assignee and that it is the profits and
\ngains of the business carried on by the assignee, when as  a
\nfact he stepped into the position of the Managing Agent only
\non  some  date in the course of the year by  virtue  of\t the
\nassignment.   It  appears to me that before  income  can  be
\nattributed under this head to an assessee, it must relate to
\nthe  business  carried\ton by the assessee  himself  In\t the
\npresent case, therefore, the profits and gains of the  whole
\nyear seem to me clearly to relate to the business carried on
\nboth by the assignor and the assignee taken together and are
\nhence  taxable as income accruing to both and  apportionable
\nas such between them.  The importance of not overlooking the
\nsignificance of the phrase “carried on by him” in subsection
\n(1)  of section 10, though in a different context, has\tbeen
\nemphasised  by the Privy Council in Commissioner of  Income-
\ntax, Bengal v. Shaw Wallace and Co.(1). A recent decision of
\nthis   Court  in  the  Liquidators  of\tPursa\tLimited\t  v.
\nCommissioner of Incometax, Bihar<\/a>(2) also emphasises this and
\nexplains  that\tthe phrase “carried on by  him”\t in  section
\n10(1)\tof   the  Indian  Income-tax  Act   “connotes\tthe.
\nfundamental  idea of the continuous exercise of an  activity
\nas the essential constituent of that which is to produce the
\ntaxable\t income.” This phrase appears to me also clearly  to
\nconnote the idea that the taxable income is that of the very
\nassessee  or  the combination of assessee  whose  continuous
\nactivity produces the income.  Where, as in this case,\tthat
\ncontinuity  is\tkept  up by  two  persons  successively,  it
\nappears to tile\n<\/p>\n
(i) I.L.R. 9 Cal. 1343.\n<\/p>\n
(2) Civil Appeal NO. 33 Of 1953.\n<\/p>\n
374<\/span><\/p>\n
that  under  this  section, the profits and  gains  are\t the
\nassessable income of both together.\n<\/p>\n
This  is in accord with the well-accepted notion, under\t the
\nnormal law, that if two persons jointly carry out a work  or
\nconduct\t a business, the total remuneration in\tfact  earned
\nfor  the  work\tor the total gains  made  on  that  business
\nbelongs\t to  both of them as their joint property  and\tthat
\nsuch  property\thas to be apportioned between them  on\tsome
\nequitable basis.  This is quite independent of any  question
\nas to whether the claim for remuneration for the work or for
\nthe  emoluments\t of  the business  can\tbe  individually  or
\njointly enforced as against the person who is liable to pay.
\nIt  cannot be disputed that in the absence of  any  specific
\ncontract to the contrary between the persons who  contribute
\nto  the work or business, the fruit of such work or of\tsuch
\nbusiness is the joint property of both, when the same has in
\nfact been realised.  Nor can it be said that this holds good
\nonly  in  cases\t where both the\t persons  concurrently\tjoin
\ntogether  to  earn  the remuneration for  the  work  or\t the
\nprofits of the business.  There is no reason in law why\t the
\nsame  principle should not be equally applicable  where\t the
\ntwo  together contribute to the total work or to  the  total
\nbusiness   in  succession  as  in  this\t case  and  not\t  in
\nconcurrence.   If,  what  arises  on  such  continuous\t and
\nsuccessive   functioning  of  two  persons  is\t the   joint
\nremuneration  of  both,\t there can be  no  doubt  that\tsuch
\nremuneration  would  be apportionable between them  on\tsome
\nequitable  basis  on the principle that\t joint\tproperty  is
\nnormally  severable.  To such a situation section  26(2)  of
\nthe  Income-tax Act would also clearly apply.  That  section
\nno   doubt  indicates  nothing\tas  to\tthe   principle\t  of
\napportionment.\t But there is no difficulty in\tthe  present
\ncase  since it is agreed that the apportionment, if any,  is
\nto be timewise.\t This also prima facie is the only equitable
\nway of apportionment on the facts of this case.
\nAt  this  stage\t it  becomes  necessary\t to  notice  certain
\nprovisions of the relevant Managing Agency Agreements  which
\nhave been strongly relied on as supporting the view contrary
\nto what I have indicated above.\t Reliance
\n375<\/span>
\nhas  been  placed on two provisions of the  Managing  Agency
\nAgreement  between  the Sassoon United Mills  Ltd.  and\t the
\nSassoons  which are relevant only in the appeal relating  to
\nthe  Agarwals.\t The first of these  provisions is  the\t one
\nalready\t noticed in another context, viz., clause 2  (d)  of
\nthe Agency Agreement which, runs as follows:
\n“The said commission shall be due to the said firm yearly on
\nthe  31st  day of March in each and every  year\t during\t the
\ncontinuance of this Agreement………….
\nIt  is\turged  that this term  stamps  the  Managing  Agency
\nAgreement with the characteristic of an incomebearing  asset
\nwhich vests solely in, the assignee the right to the  entire
\nincome payable after the date of assignment.  But it appears
\nto  me\tthat a term of this kind has reference only  to\t the
\npayment aspect of the. money which constitutes\tremuneration
\nand has no, bearing on the question as to whose income it is
\nfor  purposes of taxation.  Taxable income must\t be  derived
\nfrom  specified\t sources indicated in the  Indian  Incometax
\nAct.  Since the mere ownership of Managing Agency cannot  as
\na  matter  of law be treated as the source  of’\t income,  as
\nexplained  above, any term in the Managing Agency  Agreement
\nbetween\t the  principal\t and the agent\tentitling  only\t the
\nassignee  to receive the year’s remuneration and  negativing
\nto the assignor any direct recourse to his quondam principal
\nfor  his  share\t of the income, cannot have  the  effect  of
\ndenying\t to the assignor a substantial right to a  share  in
\nthe  remuneration,  if\totherwise  he  has  a  vested  right
\nthereto.   A distinction exists in law between the right  to
\nreceive or get payment of a certain amount of money and\t the
\nright to the money itself.  The right to enforce payment  of
\nmoney may belong to one person.\t But the beneficial right in
\nthat  money  may  belong wholly\t or  partially\tto  another.
\nBenami\tcontracts  are\tfamilar examples  of  such  a  case.
\nInstances  of  joint  rights  in  money\t or  money’s   worth
\nenforceable  only at the instance of one out of the  persons
\nentitled, in special situations, are easily conceivable.  It
\nmay be true that there is no accrual of income unless  there
\nis  a  vested right to receive the money  which\t constitutes
\nincome.\t But this
\n376<\/span>
\nproposition  has  relevance only to the factum\tor  date  of
\naccrual\t but not necessarily to the ownership of the  income
\non  such  accrual.  None of the cases that have\t been  cited
\nbefore\tus  in support of the proposition that there  is  no
\naccrual\t of  income unless there is a right  to\t receive  it
\nnegative this view.  In the course of the arguments repeated
\nstress\thas  been laid on the proposition that there  is  no
\naccrual\t of income ‘Unless there is a right to\treceive\t the
\nincome.\t  This may be so.  But it does not follow  that\t the
\nvery  person  who has the right to receive the\tmoney  which
\nconstitutes  the income is the owner of that money  or\tthat
\nthe  income accrues to him alone.  That must depend  on\t the
\nsubstantive  rights,  if  any, applicable  to  a  particular
\nsituation.   A term in a Managing Agency  Agreement  between
\nthe  principal\tand the agent as to the person to  whom\t the
\nremuneration  is payable or is to become due can  only\thave
\nbeen  meant as a protection of the principal in\t respect  of
\nmultiplicity of claims against himself and cannot settle the
\nsubstantive rights between persons who may have\t contributed
\nto earn the remuneration.\n<\/p>\n
The second provision relied on is clause 10 of the  Managing
\nAgency\tAgreement  with\t which\tthe  case  of  Agarwals\t  is
\nconcerned.  Clause 10 of the agreement runs as follows:
\n“It  shall  be\tlawful\tfor the said  firm  to\tassign\tthis
\nagreement  and the rights of the said firm hereunder to\t any
\nperson, firm or Company having authority by its constitution
\nto  become bound by the obligations undertaken by  the\tsaid
\nfirm  hereunder\t and  upon such assignment  being  made\t and
\nnotified to the said Company shall be bound to recognise the
\nperson\tor  firm or Company aforesaid as the Agents  of\t the
\nsaid  Company in like manner as if the name of such  person,
\nfirm  or Company had appeared in these presents in  lieu  of
\nthe  names of the partners in the said firm and as  if\tsuch
\nperson,\t firm  or Company, had entered into  this  Agreement
\nwith  the said Company and the said Company shall  forthwith
\nupon  demand by the said firm enter into an  Agreement\twith
\nthe person firm or Company aforesaid appointing such  person
\nfirm of Company the
\n377<\/span>
\nAgents of the said Company for the then residue of the term
\noutstanding under the Agreement and with the like powers and
\nauthorities remuneration and emoluments and subject to the
\nlike terms and conditions as are herein contained.”
\nStress has been laid on the underlined portion of the  above
\nclause.\t It is urged that this as well as clauses I and 3 of
\nthe Managing Agency Agreement show that the assignor and the
\nassignee  are  to  be  treated as one  entity  and  that  on
\nassignment the assignee becomes the Managing Agent as if his
\nname had been inserted in the Managing Agency Agreement from
\nthe  beginning,\t and  that the continuity  of  the  Managing
\nAgency was preserved thereby and that whoever satisfies\t the
\ndescription  of\t the  Managing Agent at the  time  when\t the
\ncommission  for\t the year becomes due, is  also\t the  person
\nentitled  to the amount by way of remuneration-not,  as\t per
\nthis  argument by virtue of any mutual\tarrangement  between
\nthe assignor and the assignee, but-by the very terms of\t the
\nManaging Agency which is the source of income.\tIt is urged.
\ntherefore,  that this feature stamps the Managing Agency  as
\nan  income-bearing  asset.  In\tsubstance,  therefore,\tthis
\nargument amounts to saying that by virtue of this clause the
\nservice of the assignee subsequent to the date of assignment
\ncan  be\t tacked on to the service of the  assignor  for\t the
\nearlier portion of the year, so as to constitute it  service
\nfor  the  entire year which earns the remuneration,  as\t the
\nsole property of the assignee, i.e., that the assignment has
\nto be given retrospective operation from the commencement of
\nthe  year in respect of the work so far done.  But  if\tthis
\nclause\tis  to\tbe construed as\t having\t such  retrospective
\noperation,  it\tmust, on the very terms\t of  the  underlined
\nportion, become so operative from the original\tcommencement
\n2of the Agreement itself and not from any particular date or
\nevent  thereafter.   There  is no  reason  to  confine\tsuch
\nretrospective  operation only to the inchoate advantage\t for
\nremuneration arising from partly finished work of the  year.
\nThe  underlined\t portion of the clause, if it  is  to’\thave
\nretrospective effect at all, is comprehensive enough to take
\nwithin\tits ambit every othere claim,which may have  accrued
\nbut remained 49
\n378<\/span>
\nunpaid, commencing from the initial stage of the Agency.  On
\nthis construction, therefore, the right to. ,very such claim
\nwould  pass to the assignee.  Such a result would  obviously
\nbe  untenable  and no reason exists  why  the  retrospective
\noperation, to be imputed to this clause, should be  confined
\nto the limited extent which serves the argument put  forward
\nin this behalf by the appellant-Sassoons.  It appears to me,
\ntherefore,  quite  clear  on a fair reading  of\t the  entire
\nclause\t10  of the Managing Agency Agreement that  the\tonly
\neffect\tthereof\t is to bring about the\tresult\tspecifically
\nstated in the second portion of that clause (which has\tbeen
\nside lined) i.e. that on assignment, the assignee firm shall
\nbe entitled to\tdemand and obtain from the principal Company
\na fresh Managing Agency Agreement in its own favour for\t the
\nresidue\t of  the  term\toutstanding  and  with\tlike  powers
\nauthorities  remuneration and emoluments and subject to\t the
\nlike  terms  and  conditions.  In my opinion  all  that\t the
\nclause\t10 taken as a whole means is no more than  that\t the
\nassignee is entitled to demand a fresh Agreement on the same
\nterms and that even without a fresh Agreement being formally
\nexecuted  as  between  the principal Mill  Company  and\t the
\nassignee-company their mutual rights and obligations will be
\ngoverned  by the old Agreement for the residue of  the\tterm
\nwith   the  assignee-Company’s\tname  substituted  for\t the
\nassignor-Company’s   name.    Such  effect   can   only\t  be
\nprospective and not retrospective.\n<\/p>\n
There can be no doubt, however, that though any mere  clause
\nin the Managing Agency Agreement that the employer is to  be
\nresponsible  only  to the assignee for the  payment  of\t the
\nentire\tyear’s remuneration is not by itself enough to\tvest
\nin  the assignee a beneficial right to the  remuneration  of
\nthe year, such a right may arise by virtue of a specific  or
\nimplied\t term as between the transferor and the\t transferee,
\neither\tas  part  of the deed  of  transfer  or\t independent
\nthereof.   It  may be mentioned that in the  Agarwals’\tcase
\nthere was such a specific term in the Agreement\t preliminary
\nto  the\t actual\t assignment.  But learned  counsel  for\t the
\nSassoons  expressly disclaimed it on the ground that it\t was
\nnot incorporated in the deed of transfer and was,
\n379<\/span>
\nin  any\t case, superfluous and did not rely on it.   In\t his
\nview  the  right  of  the assignee  to\treceive\t the  entire
\nremuneration did not depend on any specific term between the
\nassignor  and  the assignee, but on the fact that  what\t was
\ntransferred is an income-bearing asset which carried with it
\na  right to the entire income that falls due after the\tdate
\nof  assignment.\t It is on account of the insistence on\tthis
\nview, that, as I apprehend, learned counsel for the Sassoons
\ndisclaimed  the\t above mentioned special  term\tbetween\t the
\nassignor and the assignee as being superfluous.\t He seems to
\nhave  sought  thereby  to obviate  the\tconsequence  of\t the
\ncontention that the assignor’s share of remuneration  became
\nthe assignee’s by virtue of the specific assignment  thereof
\noperating thereon ‘on its accrual and that hence it remained
\nthe taxable income of the assignor.\n<\/p>\n
It  may be mentioned in this context that clause 10  of\t the
\nManaging Agency Agreement in Agarwals’ case has been  relied
\non  by learned counsel for Agarwals to show that  while,  it
\nmay  be, that in the normal run of events the  contract\t for
\nremuneration  under  the  Managing Agency  Agreement  is  an
\nindivisible contract for a whole year’s remuneration on\t the
\ncompletion  of a whole year’s work, this clause\t necessarily
\nimplied divisibility of contract and of the remuneration  in
\nthe year of assignment since the assignment necessarily took
\nplace with the consent of the principal Mill Company.  (Vide
\nsection 87-B(c) of the Indian Companies Act).  This argument
\nwas  advanced to support the contention that  the  Sassoon’s
\nshare  of  the\tyear’s income accrued on the  very  date  of
\nassignment.   Since,  however, in my view that was  not\t the
\nbasis  of the judgment of the High Court as explained  above
\nand  since  such an argument is not, in\t my  opinion,  open,
\nhaving regard to the statement of the case by the Income-tax
\nAppellate   Tribunal  as  well\tas  of\tthe  statements\t  of
\nappellants  and\t respondents herein, I do  not\tconsider  it
\nnecessary to deal with that argument.\n<\/p>\n
In  my\tview,  therefore,  the\tcontinuous  and\t  successive
\nfunctioning by both the assignor and the assignee under\t the
\nManaging  Agency Agreement was the effective source  of\t the
\nyear’s income.\tThat income accrued on the completion of the
\nyear and was the joint income
\n380<\/span>
\nof   both  the\tassignor  and  the  assignee.\t The   prior
\nassignments  in the course of the year operated\t as  assign-
\nments of this future right to a share of the income.  It  is
\nonly by virtue of inter se arrangement between the  assignor
\nand  the  assignee,  resulting\tfrom  the  transactions\t  of
\nassignment,  that the assignee had the right to collect\t the
\nentire income.\tNevertheless, the share in this income which
\naccrued\t to  the  Sassoons on the  completion  of  the\tyear
\nremained  the taxable income of the Sassoons and  they\twere
\nrightly\t taxed\tin  respect  thereof.\tThe  very  strenuous
\narguments  of  learned counsel for Sassoons to\tcounter\t the
\nabove  view  are based on the insistence that  the  Managing
\nAgency is like property which per se produces income and, on
\nignoring the distinction between right to receive the income
\nand right to the ownership of the income and on treating the
\nformer as settling the question of the person to whom income
\naccrues.   In my opinion these arguments  are  unsustainable
\nand  the   conclusion reached by the learned Judges  of\t the
\nBombay High Court is correct.\n<\/p>\n
The appeals are, therefore, liable to be dismissed.I express
\nno opinion on any of the other points raised.
\nAppeals allowed.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India E. D. Sassoon And Company Ltd vs The Commissioner Of … on 14 May, 1954 Equivalent citations: 1954 AIR 470, 1955 SCR 599 Author: N H Bhagwati Bench: Bhagwati, Natwarlal H. PETITIONER: E. D. SASSOON AND COMPANY LTD. Vs. RESPONDENT: THE COMMISSIONER OF INCOME-TAX,BOMBAY CITY.(With connected A DATE OF JUDGMENT: 14\/05\/1954 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-194701","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nE. D. Sassoon And Company Ltd vs The Commissioner Of ... on 14 May, 1954 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"E. D. Sassoon And Company Ltd vs The Commissioner Of ... on 14 May, 1954 - Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954\" \/>\n<meta property=\"og:site_name\" content=\"Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/LegalindiaCom\/\" \/>\n<meta property=\"article:published_time\" content=\"1954-05-13T18:30:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2016-05-12T16:19:39+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/i0.wp.com\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg?fit=512%2C512&ssl=1\" \/>\n\t<meta property=\"og:image:width\" content=\"512\" \/>\n\t<meta property=\"og:image:height\" content=\"512\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Legal India Admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@legaliadmin\" \/>\n<meta name=\"twitter:site\" content=\"@Legal_india\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Legal India Admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"123 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954\"},\"author\":{\"name\":\"Legal India Admin\",\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea\"},\"headline\":\"E. D. Sassoon And Company Ltd vs The Commissioner Of … on 14 May, 1954\",\"datePublished\":\"1954-05-13T18:30:00+00:00\",\"dateModified\":\"2016-05-12T16:19:39+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954\"},\"wordCount\":23669,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#organization\"},\"articleSection\":[\"Supreme Court of India\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954\",\"url\":\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954\",\"name\":\"E. D. Sassoon And Company Ltd vs The Commissioner Of ... on 14 May, 1954 - Free Judgements of Supreme Court & High Court | Legal India\",\"isPartOf\":{\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#website\"},\"datePublished\":\"1954-05-13T18:30:00+00:00\",\"dateModified\":\"2016-05-12T16:19:39+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.legalindia.com\/judgments\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"E. D. Sassoon And Company Ltd vs The Commissioner Of … on 14 May, 1954\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#website\",\"url\":\"https:\/\/www.legalindia.com\/judgments\/\",\"name\":\"Free Judgements of Supreme Court & High Court | Legal India\",\"description\":\"Search and read the latest judgements, orders, and rulings from the Supreme Court of India and all High Courts. A comprehensive database for lawyers, advocates, and law students.\",\"publisher\":{\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#organization\"},\"alternateName\":\"Free judgements of Supreme Court & High Court of India | Legal India\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.legalindia.com\/judgments\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#organization\",\"name\":\"Judgements of Supreme Court & High Court | Legal India\",\"alternateName\":\"Legal India\",\"url\":\"https:\/\/www.legalindia.com\/judgments\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg\",\"contentUrl\":\"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg\",\"width\":512,\"height\":512,\"caption\":\"Judgements of Supreme Court & High Court | Legal India\"},\"image\":{\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/LegalindiaCom\/\",\"https:\/\/x.com\/Legal_india\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea\",\"name\":\"Legal India Admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"caption\":\"Legal India Admin\"},\"sameAs\":[\"https:\/\/www.legalindia.com\",\"https:\/\/x.com\/legaliadmin\"],\"url\":\"https:\/\/www.legalindia.com\/judgments\/author\/legal-india-admin\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"E. D. Sassoon And Company Ltd vs The Commissioner Of ... on 14 May, 1954 - Free Judgements of Supreme Court & High Court | Legal India","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954","og_locale":"en_US","og_type":"article","og_title":"E. D. Sassoon And Company Ltd vs The Commissioner Of ... on 14 May, 1954 - Free Judgements of Supreme Court & High Court | Legal India","og_url":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954","og_site_name":"Free Judgements of Supreme Court & High Court | Legal India","article_publisher":"https:\/\/www.facebook.com\/LegalindiaCom\/","article_published_time":"1954-05-13T18:30:00+00:00","article_modified_time":"2016-05-12T16:19:39+00:00","og_image":[{"width":512,"height":512,"url":"https:\/\/i0.wp.com\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg?fit=512%2C512&ssl=1","type":"image\/jpeg"}],"author":"Legal India Admin","twitter_card":"summary_large_image","twitter_creator":"@legaliadmin","twitter_site":"@Legal_india","twitter_misc":{"Written by":"Legal India Admin","Est. reading time":"123 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954#article","isPartOf":{"@id":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954"},"author":{"name":"Legal India Admin","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea"},"headline":"E. D. Sassoon And Company Ltd vs The Commissioner Of … on 14 May, 1954","datePublished":"1954-05-13T18:30:00+00:00","dateModified":"2016-05-12T16:19:39+00:00","mainEntityOfPage":{"@id":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954"},"wordCount":23669,"commentCount":0,"publisher":{"@id":"https:\/\/www.legalindia.com\/judgments\/#organization"},"articleSection":["Supreme Court of India"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954","url":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954","name":"E. D. Sassoon And Company Ltd vs The Commissioner Of ... on 14 May, 1954 - Free Judgements of Supreme Court & High Court | Legal India","isPartOf":{"@id":"https:\/\/www.legalindia.com\/judgments\/#website"},"datePublished":"1954-05-13T18:30:00+00:00","dateModified":"2016-05-12T16:19:39+00:00","breadcrumb":{"@id":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.legalindia.com\/judgments\/e-d-sassoon-and-company-ltd-vs-the-commissioner-of-on-14-may-1954#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.legalindia.com\/judgments\/"},{"@type":"ListItem","position":2,"name":"E. D. Sassoon And Company Ltd vs The Commissioner Of … on 14 May, 1954"}]},{"@type":"WebSite","@id":"https:\/\/www.legalindia.com\/judgments\/#website","url":"https:\/\/www.legalindia.com\/judgments\/","name":"Free Judgements of Supreme Court & High Court | Legal India","description":"Search and read the latest judgements, orders, and rulings from the Supreme Court of India and all High Courts. A comprehensive database for lawyers, advocates, and law students.","publisher":{"@id":"https:\/\/www.legalindia.com\/judgments\/#organization"},"alternateName":"Free judgements of Supreme Court & High Court of India | Legal India","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.legalindia.com\/judgments\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.legalindia.com\/judgments\/#organization","name":"Judgements of Supreme Court & High Court | Legal India","alternateName":"Legal India","url":"https:\/\/www.legalindia.com\/judgments\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/","url":"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg","contentUrl":"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg","width":512,"height":512,"caption":"Judgements of Supreme Court & High Court | Legal India"},"image":{"@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/LegalindiaCom\/","https:\/\/x.com\/Legal_india"]},{"@type":"Person","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea","name":"Legal India Admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","caption":"Legal India Admin"},"sameAs":["https:\/\/www.legalindia.com","https:\/\/x.com\/legaliadmin"],"url":"https:\/\/www.legalindia.com\/judgments\/author\/legal-india-admin"}]}},"modified_by":null,"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts\/194701","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/comments?post=194701"}],"version-history":[{"count":0,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts\/194701\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/media?parent=194701"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/categories?post=194701"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/tags?post=194701"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}