M/S. CHIDAMBARAM MULRAK & CO. PVT. LTD. vs COMMISSIONER OF INCOME TAX, BOMBAY CITY I

The Supreme Court held that under Section 10(5A) of the Indian Income Tax Act, 1922, compensation received for the termination of a managing agency agreement is deemed as income for tax purposes if received during the previous year relevant to the assessment year. The Court affirmed that the amount of Rs. 10,00,000 received by the assessee in October 1953 was taxable in the assessment year 1955-56, as it fell within the purview of the newly enacted sub-section. The Court also upheld the Tribunal's decision allowing a deduction of Rs. 6,00,000 for the cost of acquiring the managing agency.