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Section 37(1), read with section 256, of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessee-firm paid commission to a sales agency whose proprietor was wife of one of its partners - ITO disallowed such payment as being fictitious - Tribunal held that commission was not allowable as business expenditure but legitimate expenditure, if any, incurred by agency was allowable - Whether question as to whether Tribunal was justified in holding that expenditure incurred by sales agency was allowable as business expenditure incurred by assessee, was a question of law arising out of Tribunal's order - Held, yes FACTS The ITO disallowed the claim of the assessee-firm on account of commission charges paid to sales agency whose proprietor was the wife of one of the partners of the assessee-firm holding that the payment was fictitious. On appeal, the Commissioner (Appeals) affirmed the order of the ITO. On further appeal, the Tribunal affirmed the finding that the payment of commission could not be allowed as a deductible business expenditure but held that the legitimate expenditure incurred by sales agency deserved to be allowed. The Tribunal, therefore, remanded the case for ascertaining that amount. The revenue's application under section 256(1) was rejected by Tribunal. On application under section 256(2): HELD The question as to whether the Tribunal was justified in holding that expenditure incurred by sales agency was allowable as business expenditure incurred by the assessee, was a question of law arising out of Tribunal's order. Note: The decision was in favour of Revenue. B.K. Rawat for the Applicant. B.L. Nema for the Respondent. JUDGMENT G.G. Sohani, Actg., CJ.-This is an application under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The material facts giving rise to this application, briefly, are as follows: while framing the assessment of the assessee for the assessment year 1977-78, the Income-tax Officer disallowed the claim of the assessee for a…

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