Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business Expenditure - Allowability of Where assessee claimed deduction of commission paid to marketing agent and Tribunal held that commission was paid for rendering service and it was also seen that turnover of assessee had steadily risen, commission paid by assessee was allowable [Assessment year 2001-02] [In favour of assessee] CIT v. Speciality Paper Co. [2009] 316 ITR 415 (Mad.) Where while completing the assessment, the Assessing Officer had disallowed the commission paid to a party on the ground that the said company had not rendered any service and also one of the partners was the director in the said company and also it was not for the purpose of business: Held that the party was the marketing agent for marketing activities on commission basis with a view to promote their sales volume. The marketing agent would be entitled for commission on sales turnover to be decided on mutual consent of both parties. It had also been decided that the agreement would be in force for a period of three years commencing from 1-4-1999, renewable for a further period of three years at the option of the parties. From the particulars available on record, it was seen also that the turnover of the appellant-company had steadily risen and the sales commission paid represented 2 per cent of the turnover for the year 1999-2000 and 1.50 per cent for the period under appeal. Both the authorities had given concurrent finding that commission was paid for rendering service. It was not a perverse order. It was a question of fact. Hence, the commission paid by the assessee was allowable. J. Naresh Kumar for the Appellant. JUDGMENT P.P.S. Janarthana Raja, J.- This appeal is filed by the Revenue against the order of the Income-tax Appellate Tribunal, Madras "C" Bench, dated November 30, 2007, in I. T. A. No. 1778/Mds/2006 for the assessment year 2001-02, raising the following substantial question of law. "Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the payment of commission by the assessee to a private limited company where its partners were directors is valid in law, when there is no evidence to…

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