Law: Income Tax Act, 1922

Section: 10,10(2)(xv)

[Indian Income Tax Act, 1922 (Xl of 1922)].........Section 10(2) (xv)- Business expenditure--Commission-Commission paid to agent-Agent to be responsible for payment by customers-No finding that commission was excessive or was paid on extra-commercial consideration-Whether commission can be disallowed-Held no. The assessee-company entered into an agreement with a company whereby the latter was appointed its sole selling agent. The agreement provided that "the agents shall be responsible for payment of the prices and all other monies to the principal immediately after the goods shall leave the principals works or godown." The agents were to be paid a certain percentage of the total sales as commission. The Tribunal found that the agreement was genuine but disallowed apart of the commission on the ground that the agents did not render any service. There was, however, no specific finding by the Tribunal that the payment was excessive or that any part of the commission was paid on extra-commercial considerations. On a reference at the instance of the assessee. Held, on the facts, that the commission paid was referable to the agent undertaking the responsibility for payment and standing guarantee for the other customers of the assessee. The Tribunal was not right in holding that entire payment was not an , allowable deduction. Case applied:- Aluminium Corporation of India Ltd. v. CIT [1972] 86 ITR Il (SC) and CIT v. Dhanrajgirji Raja Narasingirji [1973] 91 ITR 544 (SC) Cases referred to : Bengal Enamel Works Ltd. v. CIT [1970] 77 ITR 119 (SC) ; CITV. WaIchand & Co. (P.) Ltd. [1967] 65 ITR 381 (SC) ; Eastern Investments Ltd. v. CIT[1951] 20 ITR I (SC); J. K. Cotton Manufacturers Ltd. V CIT [1975] 101 ITR 221 (SC) ,J. K. Woolen Manufacturers v. CIT [1969] 72 ITR 612 (SC) ; Stott and Ingham v. Trehearne [1924] 9 TC 69 (KB) and Swadeshi Cotton Mills Co. Ltd. v. CIT [1967] 63 ITR 57 (SC). ORDER DIPAK KUMAR SEN J.-In this reference under Section 66 (I) of the, Indian Income Tax Act, 1922, the question before the court is: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the entire payment §of selling agency commission…

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