Judgment

KAPUR, J. : This is an appeal by special leave against the judgment and order of the High Court of Bombay. It arises out of a reference by the Income-tax Appellate Tribunal under S. 66 (1) of the Indian Income-tax Act (hereinafter termed the Act). The appellant in this appeal is the Commissioner of Income-tax and the respondent is a partnership firm which by an agreement dated September 23, 1935, was appointed the Managing Agent of the Keshav Mills Ltd., Petlad. For the sake of convenience the respondent firm will, in this judgment, be termed the Managing Agent and the Keshav Mills Ltd., the Managed Company. By Cl. 4 of this agreement the Managing Agent was to get a commission of 4 per cent on the sale proceeds of the cloth, yarn or other goods manufactured and sold by the company and 15 per cent on the amount of bills for charges of ginning and pressing and dyeing or bleaching and on the amount of labour bills and other work done in the running of the factory. The commission was exclusive of other charges such as adat, interest, discount, brokerage etc. The amount of commission was to be credited in the account of the Managing Agent every six months and it was entitled to