Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of Where Tribunal had remitted case to Assessing Officer to verify from recipient of commission from assessee, claim of assessee regarding such payment and this direction had not been followed by Assessing Officer, Tribunal was justified in allowing claim for deduction of commission. . [Assessment year : 1975-76] [In favour of assessee] CIT v. Official Liquidator [2009] 316 ITR 385 (Mad.) The assessee's claim for deduction of a sum on account of commission paid to one P.M. Traders was rejected. The assessee claimed that the commission was paid for sale of wood pulp and purchase of caustic soda from National Rayon Corpn. Ltd. The Assessing Officer verified the assessment records of both recipients of the commission and also made enquiries through National Rayon Corpn Ltd., which denied having any middle man to the business. The Assessing Officer, accordingly, disallowed the payment of commission treating it as bogus. The Tribunal upheld the assessee claim holding that the receipt of commission had been accepted by the recipient by its letter and in the absence of any method to discard the admission, the deduction should have been granted. The Tribunal had taken into consideration the fact that earlier it had passed an order of remittal with a direction to the Assessing Officer to enquire from the person, i.e., P.M. Traders to whom the commission had been paid. That direction had not been complied with by the Assessing Officer. On the contrary, the Assessing Officer had enquired from some of the officers of the National Rayon Corpn, which was not a direction given by the Tribunal. Held that it is well established legal principle that in the hierarchy of the statutory authorities, when the higher fact finding authority remits the matter with a direction to the lower authority to follow certain procedure, so as to be within the statutory provision, the lower authority has to make that exercise as directed by the Tribunal. In this case, the ITO had totally flouted the direction to verify the letter in which the P.M. Traders had accepted that it did receive the commission from 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