Law:

Section:

Section 256, read with section 40A(5), of the Income-tax Act, 1961 - Reference - Question of fact - Assessee-firm entered into an agreement with S under which S was made responsible to look after whole of office situated at M - He was made responsible to supervise work, employment and dismissal of employees, etc. - Restrictions were also put on S not to do any similar business of nature done by assessee - S was entitled to get salary of Rs. 200 per month and commission - Payments made during relevant accounting year to S were held to be salary and certain disallowance was made under section 40A(5) - Whether any referable question of law arose from Tribunal's order upholding disallowance under section 40A(5) - Held, no FACTS The assessee-firm entered into an agreement with one S in the employment of the assessee. The agreement stated that whole of the office situated at M would be under the direct control of S who will supervise the work and look after the work, employment and dismissal of the employees at that place. Restrictions were put on S not to do any business of the same nature as done by the assessee. S was entitled to get a remuneration of Rs. 200 per month and one month's bonus and besides he was entitled to a commission of two per cent on the sale of goods. During the relevant accounting year the payments made to S were held as 'salary' and, accordingly, disallowance under section 40A(5) was made. On appeal, the Tribunal upheld the disallowance. The reference application of the assessee was also rejected. On an application under section 256(2) : HELD In view of the decision of the Supreme Court in the case of Gestetner Duplicators (P.) Ltd. v. CIT [1979] 117 ITR 1 in the instant case no question of law arose from the Tribunal's order which required reference. Section 256, read with section 36(1)(iii), of the Income-tax Act, 1961 - Reference - Question of fact - Assessee-firm borrowed funds from bank against its overdraft facility and advanced same to S who was in employment of it - No interest was charged from S - S utilised these funds for construction of house property which was let out to assessee-Department disallowed interest paid by assessee on…

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