Law: Income Tax Act, 1961

Section: 37(1)

Income-tax----Business expenditure---Must be wholly and exclusively for purpose of business---Commission paid to sole selling agent---Competition in market for sale of products---No experienced or qualified person employed by agent--¬Goods stored only in assessee's godown---Agent not possessing physical resources necessary to carry out its duties---Finding that expenditure was not incurred wholly and exclusively for business---Valid finding of fact---Indian Income Tax Act, 1961., S.37(1). G was the Chairman of the assessee-company. For the assessment year 1964-65, the assessee-company claimed deduction, in computing its profits, of the commission paid to the S.E. Corporation on account of their services as sole selling agents. The Corporation was owned by a charitable society of which G was the President. The electrodes manufactured by the assessee required an agency which was qualified and experienced enough to overcome competition in the market. The Appellate Tribunal found that the Corporation had not employed any person who was shown to possess the necessary experience and qualification, that it had no godown of its own and it used to draw the goods from the sales office of the assessee and that the Corporation did not have the physical resources necessary to have carried out its duties as they were claimed to have been done, and held that it was not proved that the expenditure had been incurred wholly and exclusively for the purpose of the assessee's business. On a reference Held, affirming the decision of the Tribunal, that there was evidence on which the Tribunal could come to the conclusion that the assessee had not proved that the expenditure was incurred wholly and exclusively for the purpose of the assessee's business and that the finding of the Tribunal that the expenditure towards commission. paid to the Corporation was not incurred wholly and exclusively for the purpose of its business was a finding of fact arrived at on the basis of the evidence on record which could not be interfered with. JUDGMENT B.N. KIRPAL, J.---Pursuant to a direction issued under section 256(2) of the Income Tax Act, 1961, by the Allahabad High Court, the Income-tax…

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