Judgment

HEGDE, J.:- These are connected appeals by certificates. They relate to respondent s assessment for the assessment years 1954-55, 1955-56 and 1956-57. The previous financial years are the relevant accounting years.

2. In all these appeals, as directed by the High Court of Calcutta under Section 66 (2) of the Indian Income Tax Act, 1922, certain questions were submitted by the Tribunal. In the first case i.e. Civil Appeal No. 242 of 1970 only one question was submitted and in the other two cases i.e. Civil Appeals Nos. 243 & 244 of 1970, two questions were submitted. The question submitted in the first case is as follows:

"Whether on the facts and in the circumstances of the case the sum of Rs. 1,11,779 said to have been foregone by the assessee as Managing Agency commission was allowable as a revenue expenditure under S. 10 (2) (xv) of the Indian Income-tax Act, 1922 for the assessment year 1954-55"?

3. Similar questions were called for the remaining two assessment years as well. But, in addition, one more question, namely:

"Whether on the facts and in the circumstances of the case the sum of Rs. 30,000 said to have been foregone by the assessee as office allowance receivable from Gwalior Rayon and Silk Manufacturing Co. Ltd. was allowable as a revenue expenditure under Section 10 (2) (xv) of the Indian Income Tax Act, 1922 for the assessment years, 1955-56 and l956-57?"was called for.

4. At the hearing the High Court came to the conclusion that it is not necessary to answer the common question referred to in all these three appeals as the same was academic bat the question relating to the office allowance was answered in favour of the assessee following the decision of this court in Commr. of Income-tax Bombay North v. Chandulal Keshavlal & Co. 38 ITR 601 = (AIR 1960 SC 738).

5. The material facts of the case may now be stated. The assessee -respondent-is the managing agent of the National Bearing Co. Ltd. and Gwalior Rayon & Silk Manufacturing Co. As managing agent of the former company it was entitled to receive a commission of 12 1/2 per cent on the net profits of the managed company together with a sum of Rs. 18,000 as office allowance. In the case of Gwalior Rayon & Silk Manufacturing Co. the assessee was entitled to get an office allowance of Rs. 30000 per year in addition to the agreed managing agency commission. In the relevant accounting years the assessee gave up the managing agency commission due from both the managed companies. It also gave up the office allowance due from Gwalior Rayon and Silk Manufacturing company. The accounting years of both the assessee company as well as the managed companies were the financial years. In the agreement entered into between the assessee company and the managed companies no date for payment of the managing agency commission appears to have been stipulated. The commission was given up by the assessee company after the end of the financial year but before the accounts of the managed Co. were made up. The accounts of the managed companies appear to have been made up somewhere during the end of September of the year following the respective accounting years. But, in the case of office allowance the same was given up even before the end of the financial years. On the basis of these facts the Income-tax Officer as well as the Appellate Assistant Commissioner came to the conclusion that the deductions claimed were not allowable. As regards the commission, they came to the conclusion that the same having accrued at the end of each of the financial years the assessee giving up the same subsequent to those dates does not briny the case under Section 10 (1) of the Act and no case was made out under Section 10 (2) (xv). So far as the office allowance is concerned they came to the conclusion that there was no justification for giving up the same.

6. The Income-tax Appellate Tribunal differed from the view taken by the Income-tax Officer and the Appellate Assistant Commissioner. Dealing w