fJudgment

SHAH, J. : Madhowji Dharamshi Mfg. Co. Ltd. - hereinafter called the assessee - was carrying on the business of manufacturing and selling textiles. The assessee was a flourishing concern; the annual profits earned by the assessee before October 1946 ranged between Rs. 15 to 20 lakhs and it had very large reserves.

Till October 7, 1946, the assessee was managed by the Provident Investment Co. Ltd. which owned a majority of the shares of the assessee. On October 7, 1946 the entire share capital of the assessee was purchased by Dalmai Investment Company Ltd. and the Provident Investment Co. Ltd. resigned their office as managing agents of the assessee.

2. Dalmia Cement and Paper Marketing Company Ltd. hereinafter called the D. C. P. M. - were incorporated on October 21, 1937 with the object, inter alia, of carrying on the business of and to work as selling agents or managing agents of any person, firm or company. By an agreement dated October 29, 1948, the D. C. P. M. were appointed selling agents of cotton goods manufactured by the assessee for a period of 10 years commencing from November 1, 1948 upon the terms and conditions mentioned in the selling agency agreement. Und