Law:

Section:

Section 37(1) of the Income-tax Act, 1961 (Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922) - Business expenditure - Allowability of - Assessment year 1955-56 - Assessee was under liability to pay sales commission to its agents - In books of accounts entries were made crediting commission to agent though assessee had subsequently requested agent not to charge commission due to poor working results of company - Agent company passed resolution to effect not to charge commission except actual charges incurred by it - Assessee however, claimed entire amount credited in books as expenditure - Whether liability incurred having been obliterated by mutual consent of parties, assessee could not claim deduction in respect of entire amount of commission credited in account of agent company - Held, yes FACTS Under an agency agreement the assessee company was to pay commission to agent company on sales of assessee's products. In the previous year in question the commission payable on sales of sugar came to Rs. 1.82 lakhs and Rs. 22,257 on sales of distillery products. On 2-08-1954, just two days after the closing of the previous year, the assessee-company wrote a letter to the agent-company stating therein that in view of the poor working results of the company during the year it was difficult to make payments of commission at the rates stipulated under the agreement. The agent company was requested to charge only such commission, brokerage etc., as had been actually incurred. The agent company passed a resolution stating that it would charge for the period commencing on 1-09-1953, only such commission, brokerage, etc., as was payable by it in respect of sugar and distillery products sold. In the books of the assessee-company original entries were made crediting the agent-company with the commission as calculated under the agreement. The books were kept open for making adjustment entries in August, 1954, and when the agent-company passed the resolution in August, 1954, the. asseseee-company made the necessary journal entries reversing the original entries crediting the commission. The result was that there was ultimately no commission charged in the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492