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Documents citing Messrs. Godrej & Company, Bombay vs Commissioner Of Income-Tax, Bombay on 4 August, 1959

Commissioner Of Income-Tax, Calcutta vs Kettlewell Bullen & Co. Ltd. on 1 August, 1961

The last of the Supreme Court decisions in this connection to be noticed is Godrej & Co. v. Commissioner of Income-tax. This is a case of managing agency, but this was a case of one sole managing agency and what is more the ordinary business was not carrying on of different managing agencies of different companies. Godrejs decision is, therefore, distinguishable from the present reference before us. There the fact was that the assessee firm was appointed the managing agent of a company for a period of thirty years and under clause 2 of that agreement it was entitled to a commission at the rate of 20% of the net profits of the company. The arrangement was finally altered by a formal resolution of the company stating that the agreement arrived at between the managing agent on the one hand and the directors of the company on the other is that the managing agents in consideration of the company paying Rs. 7,50,000 as compensation for releasing the company from the onerous term as to remuneration contained in the present managing agency agreement should accept as remuneration for the remaining term of their managing agency 10% of the net annual profit of the company. The controversy before the Supreme Court was with regard to the character of this sum of Rs. 7,50,000, whether it was a capital receipt or a trading receipt. It was held there by the Supreme Court that this sum of Rs. 7,50,000 was paid and received not to make up the difference between the higher remuneration and the reduced remuneration but in reality as compensation for releasing the company from the onerous terms as to remuneration. In other words, so far as the managed company was concerned, it was paid for securing immunity from the liability to pay higher remuneration to the assessee firm for the rest of the term of the managing agency and, therefore, a capital expenditure and so far as the assessee firm was concerned, it was received as compensation for the deterioration of injury to the managing agency by reason of the release of its rights to get higher remuneration and, therefore, a capital receipt.
Calcutta High Court Cites 25 - Cited by 7 - Full Document

Pradeep And Co. vs Income-Tax Officer on 28 April, 1988

Having reviewed Godrej and Co. v. CIT [1959] 37 ITR 381 (SC) and CIT v. Panbari Tea Co. Ltd. [1965] 57 ITR 422 (SC) the Hon'ble Gujarat High Court observed that while trying to ascertain the payment in question was towards income or capital, all the circumstances should be evaluated and the real nature of the transaction should be ascertained because the parties may camouflage the same by using dubious phraseology. The nomenclature used may not be decisive or conclusive but it helps the court, having regard to other circumstances to ascertain the intention of the parties.
Income Tax Appellate Tribunal - Hyderabad Cites 18 - Cited by 0 - Full Document

Rajabali Nazarali And Sons vs Commissioner Of Income-Tax on 2 September, 1985

In Godrej & CO. v. CIT [1959] 37 ITR 381 (SC), a special resolution of the company passed at the meeting held on October 22, 1946, was under consideration. By virtue of the said resolution, the assessee-firm received a sum of RS. 7,50,000 and the question arose whether the same was income or capital in its hands. The Supreme Court held that the language used in the resolution was not decisive and the question. had to be determined by a consideration of all the attendant circumstances, although the language could not be ignored altogether but had to be taken into consideration along with other relevant circumstances.
Gujarat High Court Cites 11 - Cited by 20 - A M Ahmadi - Full Document

J.R. Kimtee & Sons vs Commissioner Of Income-Tax on 14 October, 1977

In Godrej & Co. v. Commissioner of Income-tax , the facts are that the assessee-firm was appointed as the managing agents of a company for a period of thirty years. Under the terms of the agreement it was entitled to a commission, towards their remuneration, at the rate of 20 per cent. on the net profits of the company. As some of the shareholders and directors of the company felt that the remuneration was extraordinarily excessive, after some negotiations some agreement was entered into between the assessee-firm and the company. According to the agreement in consideration of the company paying a sum of Rs. 7,50,000 as compensation to the assessee-firm, the latter agreed to accept as remuneration for the remaining term of their managing agency ten per cent. of the net annual profits of the company instead of 20 per cent. The Supreme Court held that the assessee-firm received the amount as compensation for the deterioration or injury to the managing agency by reason of the release of its rights to get higher remuneration and, therefore, a capital receipt.
Andhra HC (Pre-Telangana) Cites 20 - Cited by 14 - Full Document

Manna Ramji & Co. vs Commissioner Of Income-Tax, Poona on 11 February, 1967

61. Similarly in Godrej & Co. v. Commissioner of Income-tax, the assessee, who was the managing agent of a steel manufacturing company for a period of 30 years under an agreement dated 9th November, 1933, by agreement and, in consideration of the new terms of payment, the managing agents were given a lump sum compensation of Rs. 7,50,000, "for releasing the company from the onerous term as to remuneration" contained in the original managing agency agreement. The question was whether this payment compensation to the managing agents was income in their hands or a receipt in the nature of a capital receipt. It was held that "the sum was paid and received not to make up the difference between the higher remuneration and the reduced remuneration but was in reality paid and received as compensation for releasing the company from the onerous terms as to remuneration as it was in terms expressed to be. In other words, so far as the managed company was concerned, it was paid for securing immunity from the liability to pay higher remuneration to the assessee-firm for the rest of the term of the managing agency and, therefore, a capital expenditure and so far as the assessee-firm was concerned, it was received as compensation for the deterioration or injury to the managing agency by reason of release of its rights to get higher remuneration and, therefore, a capital receipt......." Here again the entire business continued as before but the contract of managing agency, which was undoubtedly in the nature of a profit-making apparatus, so far as the assessee-firm was concerned, was damaged and, therefore, whatever sum was paid to cover that damage was held to be in the nature of a capital receipt in the hands of the assessee. In spite of the fact that the business of the managing agents continued intact as before, the compensation was held to be in the nature of a capital receipt because it was pad to compensate for the injury to the profit-making apparatus. The case therefore shows that the question whether the business continues or not to a greater or smaller measure is not relevant to the question whether the compensation paid would be a receipt of a capital nature of a receipt in the nature of a revenue receipt in the hands of the assessee.
Bombay High Court Cites 10 - Cited by 2 - Full Document

Commissioner Of Income-Tax, Bombay ... vs Automobile Products Of India Ltd. on 4 September, 1981

15. We were also referred to Godrej & Co. v. CIT . The Supreme Court in the said case was considering whether the payment of Rs. 7,50,000 received by the assessee in the year 1947, in pursuance of a modification of the managing agency agreement by which the commissioner at the rate of 20% of the net profits receivable by it was reduced to 10% was income or capital. It was observed that the questions had to be determined by a consideration of all the attending circumstances. The conclusion of the Supreme Court was that as far as the assessee-firm was concerned, the amount of Rs. 7,50,000 was a compensation for the deterioration or injury to the managing agency by reasons of the release of its right to get higher remunerations and, therefore, a capital receipt. On the other had, where an assessee carried on business in a variety of agencies and deals in diverse lines, the acquisition or giving up or transfer of agencies can conceivably be regarded as being in the normal course of business. On that footing, the amount of compensation received by it for such extinction or transfer could be regarded in the nature of income.
Bombay High Court Cites 6 - Cited by 18 - Full Document
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