The main legal point established in the judgment is the interpretation of the provisions of the Income Tax Act regarding the assessment of income tax on business profits, particularly in cases where the business is carried on by the assessee through managers.

JUDGMENT

DERBYSHIRE, C.J. - This is a Reference to this Court made by the Income Tax Officer, Burdwan-Birbhum, arising out of the assessment made in the year 1932-33 upon Nrisingha Chandra Nandy Chowdhury as an individual on income from money-lending business carried on by him at Baidyapur in the Burdwan District, a rice mill at Boinchee in the Hooghly District, a business in stevedoring and dubashing in Calcutta, money-lending business carried on by him at Deoghar in the Sonthal Parganahs and his income from other sources. It is the stevedoring and dubashing business in Calcutta which gives rise to the question which is asked by the Commissioner. This stevedoring and dubashing business was carried on under the name of Chatterji & Co., and the question asked of this court is- what is the income properly assessable to income tax of the assessee in respect of the business of Chatterji & Co. ?

The assessee for some years previous to 1931 was the proprietor of this stevedoring and dubashing business of Chatterji and Co., and appears to have appointed Sarat Chandra Chatterji, Tulshi Charan Chatterji and Radha Charan Chatterji who are described as merchants and land-holders, as managers of this business and the Chatterjis appear to have acted as managers of that business under certain agreements made between them and the proprietor.

On the 16th of March, 1931, an agreement in writing was made between the assessee described as the proprietor of the business and the said three Chatterjis who were described as managers. In that agreement the previous agreements were referred to. Then the written agreement proceeds in its operative part-

"Now it is hereby Agreed and Declared as follows :-

"1. The proprietor shall employ the managers as managers of his said business for the said period of five years commencing from the said 1st day of Baisakh, 1338 B. S., and the said business shall continue to be carried on by the managers up to the end of the month of Chaitra 1337 B. S., by virtue of and under the said hereinbefore in part recited agreement dated the 13th day of April, 1930, and all the terms, conditions and stipulations therein contained including the clause about adjustment of accounts shall be deemed to apply thereto notwithstanding anything herein contained.

"2. The managers shall continue to carry on and conduct the business of the proprietor and secure all Stevedoring and Dubashing work for and on behalf of the proprietor in the name of his said firm of Chatterjee & Co., in respect of the following lines of Steamships and vessels;

"3. The managers shall be at liberty to secure at any time during the continuance of this agreement contracts for Stevedoring and Dubashing work in respect of any other line of steamships and vessels for and on behalf of the proprietor and in the name of his said firm of Chatterjee & Co.

"4. The managers shall after collecting all bills and outstandings of the said firm of Chatterjee & Co., in respect of Stevedoring works in ships and vessels (excepting Tally Clerks, salt and extra gangs and winchmen) pay to the proprietor 5 per cent. on the gross realization and in respect of Dubashing works (with the exception of Captains and Gharry hire) 2 1/2 per cent. on the gross realisations without any deduction or abatement, whatsoever. The managers shall also pay to the proprietor a further sum of Rs. 1,000 per year on or before the expiry of the last day of the month of Chaitra each and every Bengali year during the aforesaid period of five years the first of such annual payments to be made on or before the expiry of the last day of the month of Chaitra, 1338 B. S. The managers shall after paying all expenses of and incidental to the carrying on of the business of the said firm of Chatterjee & Co., including salaries of c