Law:

Section:

Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payments - Assessment years 1994-95 and 1995-96 - Pursuant to agreement, appellant-assessee paid commission at 7.5 per cent of its turnover to KSEDC and claimed deduction in its returns which was restricted under section 40A(2) to 50 per cent of profit accruing to assessee before commission - Whether Tribunal was correct in restricting commission to extent of 7 per cent of turnover which was based on findings of fact on which no question of law, much less any substantial question of law arose and, therefore, instant appeal had to be dismissed - Held, yes P. Balachandran and Smt. Preetha S. Nair for the Appellant. George K. George for the Respondent. JUDGMENT G. Sivarajan, J. - These two appeals are filed by the same assessee under section 260A of the Income-tax Act, 1961 (for short 'the Act') against the order of the Income-tax Appellate Tribunal, Cochin Bench in I.T.A. 172/Coch./98 for the assessment year 1994-95 and I.T.A. No. 490/Coch./98 for the assessment year 1995-96 by two separate orders. This Court while admitting the said appeals issued notice on the following questions of law: "1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in restricting the commission to the extent of 7% of the turnover ? 2. Whether Appellate Tribunal was justified in disallowing the commission over and above 7% on the ground that it is clearly hit by section 40A(2) and it is not wholly and exclusively incurred for the purpose of business ? 3. Whether the Appellate Tribunal was justified in disallowing the commission in the light of agreement, services rendered, and other evidence ?" The brief facts are: The appellant is a manufacturer of aluminium electrolytic capacitors and it is a subsidiary company of Kerala State Electronics Development Corporation Ltd. (for short 'KSEDC'), a company of the Government of Kerala. On 4-1-1993 the appellant entered into an agreement (Annexure D) with KSEDC Ltd. in which latter was appointed as a sole selling agent of the appellant company and it has to sell the products manufactured by the appellant…

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