Managing agency is a business and income from managing agency is liable to excess profits tax.

Judgment

S. K. DAS, J. : These are two appeals with special leave from the Judgment and order of the High Court of Hyderabad dated April 10, 1953, in two references under S. 48(3) of the Hyderabad Excess Profits Tax Act. The question which the High Court answered against the assessee in the said references was -

"Whether in the circumstances of the case, the officer of the Excess-Profits Tax Department were right in treating the income of the assessee or the Industrial Trust Fund as income from business."

The High Court answered the question in the affirmative. The point for decision before us is if the High Court correctly answered the question.

2. The relevant facts which led to the question and answer are these. There were two cotton mills in the State of Hyderabad (as it was then known) called Azamjahi mills and Osmanshahi mills. They were public joint stock companies. By a Firman-e-Mubarak of 1929 issued by the then Ruler of the State was formed an institution called the Industrial Trust Fund, the purpose of which was to help large and small industries on behalf of the Government of the State. The management of the Trust was entrusted to a Committee which consisted of three members of the Government, who were called Trustees. By two agreements dated April 12, 1934 and July 27, 1934, made between the Trustees of the one part and the two mills of the other, the Trustees were appointed secretaries, treasurers and agents of the said mills. Under these agreements the Trustees were given the general conduct and management of the business and affairs of the mills and they were entitled to appoint employees and were also entitled to delegate to other persons all or any of the powers, authorities, discretions etc. under the agreements subject to the approval of the Board of Directors of the respective mills. By two other agreements also dated April 12, 1934 and July 27, 1934, the Trustees were appointed selling agents of the mills. By two agreements both dated October 16, 1938, which were supplemental to the selling agency agreements mentioned above, the Trustees were given power to delegate all or any of their powers, authorities etc. to other persons subject to the approval of the Board of Directors of the respective mill. Till October, 1938 the Trustees exercised their powers and performed their functions under the agreements aforesaid through an advisory Board, and Quamar Shaffi Tyabji, appellant before us, was appointed chairman of the Advisory Board on a remuneration of Rs. 1,500/- per month plus a certain commission. Sometime in 1938 the Advisory Board was dissolved, and on December 6, 1938, an agreement was entered into between the Trustees and the appellant. Clause 11 of the preamble of this agreement recited :

"The said Trustees are desirous of delegating such of the powers, authorities and discretions as such secretaries, treasurers and agents as also as such selling agents of the said two mills as aforesaid as are hereinafter mentioned to and appointing the said Quamar Shaffi Tyabjee as the managing agent of the business of the said trustees as such secretaries and treasurers and agents as also as such selling agents of the said two mills as aforesaid in and for the matters and purposes hereinafter mentioned." The agreement then recited that the approval of the Board of Directors of the two mills having been obtained, the appellant was appointed managing agent of the business of the Trustees as secretaries, treasurers and agents and also as selling agents of the two mills. Clause 2 of the agreement detailed the powers of the appellant which were the same as those of the Trustees to conduct and manage the business of the two mills, subject however to the general control of the Trustees. In other words, the full powers of management and of the selling agency in relation to both the mills were delegated to the appellant. Clause 3 said inter alia that the appellant would hold the office of managing agent and selling agent for t