Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment years 1963-64 to 1965-66 - Whether, where there was no evidence to establish that sole selling agent had rendered any service to assessee, commission paid to such agent could not be allowed as business expenditure - Held, yes - Whether, where Tribunal had not considered material facts and documentary as well as oral evidence on record which were relevant for arriving at a finding with regard to assessee's claim for deduction of remuneration paid to a manufacturing supervisor, matter was to be remanded for reconsideration of assessee's claim - Held, yes FACTS During the relevant assessment years the assessee entered into an agreement with one M who was engaged as sole selling agents in respect of spun R.C.C. pipes and cotton manufactured by the assessee. Another agreement was entered into with S where by S was made the manufacturing supervisor. The assessee claimed that commission or remuneration paid to the said agents/supervisor were business expenditure. The ITO found that there was no evidence to show that SM who was proprietor of S and a brother of M, was responsible for acceptance of the tender of the assessee by the authority concerned, and that no claim had ever been preferred by the assessee against the manufacturing supervisor. The remuneration paid to S was, therefore, disallowed by the ITO. M also could adduce no evidence to show the nature of the services rendered to enable him to earn the commission. The ITO, therefore, disallowed amounts of commission paid to M also. On appeal, the AAC confirmed ITO's order. On second appeal, the Tribunal found that neither the assessee nor S could adduce any evidence to show the nature of the services rendered by S or to establish that S was in fact responsible for having the said tender accepted. The constituted attorney of S admitted that there was no correspondence between S and the Government in this regard. He admitted that there was no direct evidence to show that S acted in the matter or that they had attended to the loading or unloading of the goods. The Tribunal held that mere entering into an agreement and…

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