Harnam Singh, J.

1. In Civil Reference Case No. 18 of 1952, the question referred to us for decision is in these terms:

"Whether on a true construction the Managing Agency Agreement between the assessee Company and its Managing Agents entered into in 1936, the relevant clause of which is quoted above, the Excess Profits Tax payable should be deducted from the profits of the Company for the purpose of arriving at the annual net profits of which a percentage should be paid to the Managing Agents as their commission."

2. By Clause II of the managing agency agreement made in April 1936, the Delhi Flour Mills Company, Limited, hereinafter referred to as the assessee-company, agreed to pay to the managing agents commission equal to ten per cent of the annual net profits to be computed after allowing the working expenses, Interest on loans and due depreciation, but without setting aside anything to reserve or other special funds.

3. In calculating the commission of the managing agents for the period between 1-11-1944, and 31-10-1946, the assessee-company did not take into account the income-tax and the excess profits tax. The Income-tax Officer, however, held that in arriving at t