Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment years 1981-82 to 1984-85 - Assessee claimed deduction on account of 'secret commission' paid to employees of customers as an inducement for granting business - However, assessee failed to supply particulars of persons to whom such commission were paid - ITO conducted a detailed enquiry and concluded that claim was imaginary and false and, hence, disallowed deduction - Tribunal, however, found that assessee had paid secret commission and it was incidental to its business and that deduction had been allowed during preceding assessment years and, thus, allowed assessee's claim - Whether burden of proving that a particular expenditure has been laid out or expended wholly and exclusively for purposes of business so that assessee may be entitled to claim deduction, is on assessee - Held, yes - Whether it is open for Tribunal or for court to allow disallowance solely on ground that in respect of certain previous years such disallowance was allowed though such disallowance is contrary to law - Held, no - Whether Tribunal's findings were based on no evidence and were perverse since it had not addressed itself to relevant questions properly to see if necessary conditions existed or not to allow deduction under section 37(1) and whether assessee had discharged burden cast on it - Held, yes - Whether, therefore, assessee was disentitled for deduction - Held, yes Section 256 of the Income-tax Act, 1961 - High Court, reference to - Whether High Court in a reference exercises advisory jurisdiction in regard to question of law and it is only when it has before it a question that asks whether Tribunal has, arrived to a conclusion which is perverse, that it may go into facts, for this is a question of law - Held, yes FACTS The assessee was having more than 600 branches scattered throughout the country. During the course of assessment proceedings, it claimed that it paid 'secret commission' to the employees of the customers as an inducement for granting business to the transport operator and, therefore, be allowed deduction under section 37(1). The ITO noticed that there was a sharp…

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