1. SEN, J. This is a reference under s. 66(2) of the Indian IT Act, 1922, hereinafter described as the Act.

2. The facts, as appearing in the statement of the case, are stated below :

The assessee, J. Thomas and Company Limited, Calcutta, is a private limited company doing business as tea and shellac brokers. Mr. R. A. S. Thomas belonging to the family of the founders joined the business in 1929 as an assistant. In terms of an agreement between the firm and Mr. Thomas, he was appointed a co-managing director for a period of two years w.e.f. April 1, 1949. With effect from April 1, 1951, the agreement was renewed for a period of another three years expiring on March 31, 1954. In terms of the agreement the salary was Rs. 40,000 per annum plus a commission of 5 per cent. on the net profit. He was also the holder of 325 ordinary shares of the company. On this qualification he was given a share of the profits in the firm of M/s Thomas Cumberlege and Inskipp carrying on business in the United Kingdom. Under the articles of association of J. Thomas and Company Limited, a retiring director was required to sell all the ordinary shares and by convention the sharing of profits in the