HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Ram Pershad v. Commissioner of Income-Tax, New Delhi
Civil Appeal No. 1946 of 1968 — Supreme Court appeal or expressly printed appeal group decided in this judgment / I.T. Reference No. 46-D of 1962 — Originating High Court appeal/reference docket; not an additional Supreme Court appeal
[1973] 1 SCR 985 ·
1922 Act: 7 · 1922 Act: 66(1)
Holding and result. The managing director was an employee on the particular articles and service terms; his profit-linked commission was salary under section7 despite considerable managerial autonomy.
Sources & disclosures includedDownload original judgment / order
3 Judges · K. S. Hegde · P. Jaganmohan Reddy · H. R. Khanna
Assessment years: 1956-57
01 · Facts of the case
The managing director’s ₹53,913 profit-linked commission was salary because his functions remained subject to the company’s governing powers and employment terms. Ram Pershad and his wife held substantial shares in a hotel company. His remuneration included ₹2,000 monthly salary, ₹500 monthly car allowance, board and lodging, and ten per cent of gross profits. For assessment year 1956-57 he waived that commission after accounts were finalised but before shareholder approval, to avoid eliminating the company’s net profit. The tax authorities, Tribunal and Delhi High Court treated it as accrued salary. In November 1971 the Supreme Court sought a supplementary statement on the alternative business-deduction question; the Tribunal answered it against him.
Source: SCR987–988C: remuneration,waiver,reference questions and supplementary statement.
02 · Discussion by the Hon’ble Court
The remaining issue was the head of income under the Indian Income-tax Act, 1922: section 7 salary, which included commission, or business income. Jaganmohan Reddy J rejected an exclusive day-to-day-control test. Employment depends on the business, duties, articles and agreement; professional or managerial autonomy can coexist with service. A director may act as corporate agent while separately holding an employee’s contractual position. Here the managing director had broad powers, including delegation, but had to implement the Board’s decisions within the articles. His twenty-year appointment could end for lack of diligence or conduct against the company’s interests. Separate permission to undertake agency work reinforced the distinction from his managing-director employment. Board supervision need not be continuously exercised to be legally effective. The cited treasurer and managing-agent cases turned on materially different contractual arrangements; they did not displace analysis of this company’s provisions.
Source: SCR988D–993F: tests and precedents;993G–996A: particular articles,termination and board control.
03 · Judicial decision
The Court held the remuneration salary under section 7. At this stage the receipt’s revenue character and accrual, in light of the supplementary proceedings and Morvi Industries, were no longer disputed on the stated basis. The salary conclusion made the other questions unnecessary; the Court did not separately decide a section 10 deduction entitlement.
Source: SCR988C–D: narrowed issue/accrual posture;996A–B: salary and other questions unnecessary.
04 · Outcome / in whose favour
Assessee’s appeal dismissed with costs; the salary treatment of the commission stood. The ₹53,913 commission retained salary character; the alternative business-deduction question did not require decision.
05 · AKHB REVIEW POINT
Read the appointment documents: title, shareholding, term and percentage commission do not alone establish independent business. Compared 1961 sections 15/17(1) and 2025 section 16(d) distinguish employer-linked salary from its commission component. New Act section 15 is supported only by a complete official indexed excerpt, not direct PDF verification. No universal director-employment, modern payroll or withholding result follows; conflicting printed contract/accounting dates remain disclosed.
Source: SCR989–990B,993E–995H: dual role and contractual control;987/994 date variants.
Source & verification
Download original judgment / order · Open cited source rendition
12-page retained public-mirror SCR report. The complete report was read as text and page images. The acquisition URL is preserved provenance; current endpoint availability and authentication as a signed original are not newly verified. All physical pages1–12/SCR985–996: full caption/headnote, dockets, entire Jaganmohan Reddy J judgment, supplementary-statement stage, all employment precedents and articles/agreement terms, final salary holding/costs. Every text and image personally read.
- SCR 987 describes agreement20 November 1955; SCR 994 identifies clause(k) agreement29 November 1955. Both printed, no harmonisation.
- SCR 987 opens with account-year ending30 September 1955 but recounts taxpayer arguments on31 March 1956; preserve distinction/anomaly without inventing chronology.
- OCR misreads physical page4 printed988 as998 and title page985 as115; visual printed folios control.
- The 1971 supplementary-statement direction is a prior stage in this appeal, not this final judgment’s decision date.
- Modern statutory evidence is limited to the exact versions and scopes in sources; retained capture hashes are not original website/PDF hashes unless expressly labelled. No present-tax-year or full savings determination.
Statutory scope
Indian Income-tax Act, 1922; 7, 66(1)
Whole 15 and 17(1), displayed 2025, read. Employer-linked due/paid/arrears charge is distinct from salary definition 17(1)(iv), which includes fees/commissions. Partner remuneration exclusion and no-duplicate-advance rule are retained.
Whole 16, displayed 2025, includes fees/commission in (d). Official indexed Act excerpt supplies complete 15(1)–(4), with employer-linked charge, former-employer inclusion, no double inclusion of advance, and partner exclusion. Direct PDF retrieval failed; no separate amendment-year or image certification.
Legacy 1922 Act holding; comparison versions and personally read scopes are explicit. No automatic precedent carryover or exhaustive present-law/repeal/savings determination.
Other provisions addressed: Sections10(1) and10(2): alternative question became unnecessary; Indian Companies Act1913, section17(2), TableA regulation71
Later treatment
Source checked 2026-10-07. No specific later judgment is adopted in this note; no absence of later treatment is asserted.
Comprehensive subsequent history and present-law applicability are not certified.
Comprehensive subsequent history remains unverified; no later-use claim adopted.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
Identified source links
- Income-tax Act, 1961: selected provision
Official departmental rendition displayed 2025 Identity/version lines38–58; entiresection15(a)–(c) and both Explanations, lines63–75. Fresh personal bounded read of exact retained official tool-text capture. No inherited actor read, original HTML/PDF-byte or image claim; no full present-law, tax-year or repeal/savings determination.
- Income-tax Act, 1961: selected provision
Official departmental rendition displayed 2025 Identity/version lines42–62; introductoryline69 and complete 17(1)(i)–(ix), lines71–83. Perquisite/profits-in-lieu clauses17(2)–(3) are not the adopted comparison. Fresh personal bounded read of exact retained official tool-text capture. No inherited actor read, original HTML/PDF-byte or image claim; no full present-law, tax-year or repeal/savings determination.
- Income-tax Act, 2025: selected provision
Official departmental rendition displayed 2025 Identity/version lines38–58; complete 16(a)–(l), lines63–77. Fresh personal bounded read of exact retained official tool-text capture. No inherited actor read, original HTML/PDF-byte or image claim; no full present-law, tax-year or repeal/savings determination.
- Income-tax Act, 2025: selected provision
Departmental Act 2025 PDF indexed text; the specific excerpt does not display a separate amendment-year label. Complete displayed/indexed section 15(1)(a)–(c), 15(2), 15(3), 15(4). No PDF physicalpage or web-line position is supplied by this search rendition. Fresh read of complete displayed section 15(1)–(4) in official indexed Act excerpt only. Direct PDF retrieval failed; no physical page, raw PDF, image, independent amendment-year or complete current-law verification.
AI disclosure & professional disclaimer
AI-assisted research. The AKHB Review Point is editorial analysis, not part of the Court’s judgment.
AI-assisted legal research note for general information and professional research. It is not legal or tax advice. Verify the original judgment, applicable statutory version and subsequent judicial treatment before relying on it. The AKHB Review Point is editorial analysis, not part of the Court’s judgment.