Law: Income Tax Act, 1961

Section: 40

Income tax----Company Disallowance of expenditure Expenditure by company resulting directly or indirectly in provision of "Remuneration" or "Benefit" to director or relative of director Commission to firm acting as sole selling agent Directors of company and relatives of directors partners of firm Payment by company to firm does no amount to direct or indirect "remuneration" or "benefit" to directors and relatives of directors Such payment cannot thus be disallowed. C.I.T. v. Avon Cycles (P.) Ltd. (1980) 126 ITR 448 (P & H) fol. JUDGMENT GOKAL CHAND MITAL, J. Hemco Industries (P.) Ltd. Company, the assessee, carried on the business of manufacture of nuts and bolts. The company appointed Bharat Sales Corporation as its sole selling agent and during the period relevant to the assessment years 1968 69 and 1969 70, the assessee paid commission to the sole selling agent amounting to Rs. 42,476 and Rs. 48,498, respectively. During the assessment proceedings, the Income tax Officer found that one of the partners of Bharat Sales Corporation was director of the assessee company and other partners were related to the shareholders of the assessee company. In view of this, he applied section 40(c) of the Income tax Act, 1961 (hereinafter referred to as "the Act"), and for the first year disallowed the commission to the extent of Rs. 22,694 and for the next year disallowed Rs. 29,000. On the assessee's appeal, the Appellate Assistant Commissioner restricted the disallowance for the first year to Rs. 11,984 and maintained the disallowance for the subsequent year. The order of the Appellate Assistant Commissioner was confirmed by the Income tax Appellate Tribunal, Amritsar. At the instance of the assessee, the following two common questions have been referred for the opinion of this Court: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal has erred in law in law in upholding the order of the Appellate Assistant Commissioner disallowing part of the commission to the assessee for the assessment years 1968 69 and 1969 70 on estimate basis? (2) Whether, on t e facts and in the circumstances of the case, there was any material to hold that the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492