SABYASACHI MUKHARJI, J.

( 1 ) THIS is a reference under Section 256 (1) of the Income-tax Act, 1961. This reference relates to the assessment years 1962-63 and 1963-64, the relevant previous years for which were calendar years 1961 and 1962, respectively. It appears that there was a company known as Indian Galvanizing Co (1926) Ltd. , which has been referred to briefly by the Tribunal as I. G. , and we shall follow the same pattern. It was a subsidiary of Balmer Lawrie and Co. Ltd. , which has been referred to shortly as B. L, B. L. held 1,95,722 out of 3,69,459 ordinary shares of I. G. and was carrying on business in the manufacture of steel containers and drums in the factories at Bombay and at Calcutta. B. L. were its managing agents appointed as such under an agreement dated 8th December, 1926. This agreement of managing agency expired on the 14th January, 1957, but by an agreement dated the 11th March, 1957, I. G. reappointed B. L. as managing agents for a period of 10 years as and from 15th January, 1957. In the year 1958, the remuneration that was paid by I. G. to B. L, for acting as managing agent was Rs. 40,000 and the directors' remuneration was Rs. 8,000. In the calenda

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