Judgment

HDGDE, J.:- These are appeals by special leave. They arise from a reference under Section 66 (1) of the Indian Income-tax Act, 1922. In order to properly appreciate the decision of the High Court, it would be convenient to set out the material facts at the very outset.

2. The assessee, an individual, derived during the accounting years ending on October 21, 1949 and November 9, 1950 - the relevant assessment years being 1950-51 and 1951-52 - considerable income from various sources in Hyderabad as well as in other places. In 1935, the assessee had promoted a public limited company called Dhanraj Mills ltd. at Bombay. The assessee was appointed as its managing agent for a period of 50 years. He was also appointed as a permanent director and chairman of the Board of Directors. In 1937, the company got into financial difficulties. Hence the assessee invited the assistance of one Ramgopal Ganpatrai, who agreed to bring in the necessary finance. A tripartite agreement was entered into between the assessee, the company and the said Ramgopal Ganpatrai. Under that agreement it was provided that the assessee show give up the managing agency and the company should appoint Ramgopal G