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Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1994-95 - Assessee claimed deduction in respect of commission paid to non-resident sole selling agency for promoting market in foreign countries - Assessing Officer found that said agency was managed by a former employee and it had no infrastructure facility necessary to render service and disallowed claim - Tribunal allowed assessee's claim by rendering a finding that revenue had not produced any material to show that sole selling agent did not have any infrastructure facility - Whether appeal filed by revenue was to be dismissed - Held, yes CASES REFERRED TO Modi Industries Ltd. v. CIT [1993] 200 ITR 329/[1992] 65 Taxman 534 (Delhi) [Para 4] and CIT v. K. Manickam [2002] 258 ITR 175 (Mad.) [Para 9]. N. Murlikumar for the Appellant. JUDGMENT N. Kannadasan, J. - The above appeal is filed as against the order dated October 26, 2004, of the Income-tax Appellate Tribunal 'D' Bench, Chennai. 2. The assessment of the assessee for the assessment year 1994-95 was completed under section 143(3) of the Income-tax Act on March 27, 1997. The company manufactures a wide range of products like Automotive and industrial chains, several auto ancillary products, etc. The Assessing Officer found that the assessee had paid sole selling agency commission to the following persons as detailed below : Rs. EMDI Asia (P.) Ltd., Singapore 1,78,379 EMDI Europe SA, Luxembourg 39,19,825 Total 40,98,204 3. The Assessing Officer found that in the earlier year M/s. EMDI was managed by a former employee and his wife. It has no infrastructure necessary to render the service. For the reasons discussed in the assessment for the earlier year, the claim was disallowed. 4. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). Before the Commissioner of Income-tax (Appeals), the assessee's representative contended that the reliance placed by the Assessing Officer on the Delhi High Court's decision in Modi Industries Ltd. v. CIT [1993] 200 ITR 3291 is not correct and the said decision supports the assessee's case. It was also…

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