The principle of apportionment under R. 9 of Sch. 1 of the Excess Profits Tax Act is applicable to all contracts which are intended to be operative for a fixed period.

Judgment

SHAH, J. : These appeals relate to Excess Profits Tax liability of the appellants in respect of two chargeable accounting periods April 1, 1944 to March 31, 1945 and April 1, 1945 to March 31, 1946.

2. The appellants were under an agreement dated July 11, 1945, appointed managing agents for 20 years of the Coimbatore Spinning and Weaving Co., Ltd. - hereinafter referred to as the company. Prior to October 1, 1944, the appellants were the Managing Agents of the Coimbatore Mills Agency Ltd.- hereinafter referred to as the Agency Company who were the Managing Agents of the company. The year of account of the appellants ended on March 31, of the company on June 30, and of the Agency Company on September 30. Under the agreement by which the appellants were appointed managing agents, the following remuneration was provided :

1. Office allowance at Rs. 1,500/- per mensem;

2. Commission at 1% on all purchases of cotton and stores and 2 1/2% on all capital expenditure incurred from time to time; and

3. Commission at 10% on the net profits of the company due and payable yearly immediately after the accounts of the company were closed.

3. For the assessment year 1945-46, the appellants submitted a return of their income inclusive of the following items :

1. Remuneration from the Agency Company Rs. 36,000

2. Commission at 10% on profits from the Agency Company upto 30-9-1944 Rs. 37,953

3. Remuneration from company from 1-10-1944 to 31-3-1945 Rs. 9,000

4. Commission at 1% on cotton and stores purchased during this period Rs. 21,704

4. This return was accepted by the Additional Income-Tax Officer, Coimbatore I & II Circles, and the appellants were assessed to income tax. Excess Profits Tax was also worked out on the same basis for the chargeable accounting period ending March 31, 1945. For the assessment year 1946-47, the appellants submitted a return of their income which included the following items :

1. Remuneration from the company for one year from 1-4-1945 Rs. 18,000

2. Commission at 10% on the profits of the company paid in December 1945 (1-10-44 to 30-6-1945) Rs. 1,90,889

3. Commission at 1% on purchases of cotton and stores from 1-4-1945 to 30-6-1945 Rs. 16,777

4. Commission at 2 1/2% on capital expenditure from 1-10-1944 to 30-6-1945 Rs. 1,690.

5. The Tax Officer in charge of the assessment directed that the commission on purchases and capital expenditure be taken into account for the year April 1, 1945 to March 31, 1946 and that the receipts be computed accordingly. The amount of Rs. 1,127/- attributable out of item 4 was accordingly taken into the account of the previous year after reopening the assessment under S. 34 of the Income Tax Act, and the commission on the profits of the company was apportioned between the period October 1, 1944 to March 31, 1945 and April 1, 1945 to June 30, 1945, by the application of R. 9 of Sch. 1 of the Excess Profits Tax Act. The Tax Officer also determined the proportionate commission payable under items 3 and 4, for the period ending March 31, 1946, and as a result of the apportionment, the liability of the appellants, original and revised, for income tax and Excess Profits Tax for the assessment year 1945-46 and chargeable accounting period April 1, 1944 to March 31, 1945, stood as follows:

Original assessment of income tax Rs. 1,04,654.

Excess Profits Tax Rs. 45,292.

Revised figures

_______________

Income Tax (loss) Rs. 36,182.

Excess Profits Tax Rs. 1,41,962-11-0.

6. For the assessment year 1946-47 and chargeable accounting period April 1, 1945 to March 31, 1946, tax liability was computed at :

Income Tax Rs. 1,66,271.

Excess Profits Tax Rs. 1,13,163-5-0.

7. The orders of assessment for income tax and Excess Profits Tax were confirmed by the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal. On the applications of the appellants for reference under S. 66 (1) of the Income Tax Act and S. 21 of the Excess Profits Tax Act, the Tribunal drew up a statement of the case and sub