Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1988-89 - Assessee-firm claimed deduction of commission paid to various agents who were stated to be relatives/friends of its partners - Assessing Officer disallowed claim holding that such payment was devised by assessee to reduce tax liability - On appeal, Commissioner (Appeals) allowed amount of commission partly - On further appeal, Tribunal recorded findings that except one, no agent was relative or friend of partners of assessee-firm; and that payment of commission was for advancing purpose of assessee's business - Tribunal, therefore, allowed deduction of commission in entirety - Whether any question of law did arise from Tribunal's order - Held, no FACTS The assessee-firm claimed deduction of commission paid by it to various agents who were stated to be relatives/friends of its partners. The Assessing Officer disallowed the claim holding that payment of commission was devised by the assessee in order to reduce tax liability. On appeal, the Commissioner (Appeals) allowed a part of commission paid, holding that the assessee could not procure business without making payment of commission. On second appeal, the Tribunal noticed that the assessee had entered into an agreement with IDPL in terms of which it was required to procure supply orders for IDPL from institutions and the agents appointed by the assessee-firm assisted in persuading the institutions to place the orders with IDPL and arrange acceptance of supply made by IDPL. The Tribunal, therefore, held that expenditure incurred on payment of commission to the agents was allowable under section 37. On reference: HELD Whether the agents were close relatives/friends of the partners of the assessee-firm was necessarily a question of fact and the Tribunal, by referring to section 2(41), had found it as a fact that except 'A' who was wife of a partner, no one else was the relative of the partners of the assessee-firm. Likewise, there were findings by the Tribunal that the expenditure on payment of commission was for advancing the purpose of the assessee's business and the services of the agents procured by…

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