Law: Income Tax Act, 1922

Section: 10(2)(x),10(2)(xvi)

Income-tax Act, 1922 -- Sections 10(2) (x), 10(2) (xvi) ---- Business expenditure -- Brokerage - Company - Brokerage paid to Secretary by the company besides fixed salary -- Brokerage paid for services rendered not in capacity of employee or in terms of conditions of services but under contractual agreement -- Whether admissible deduction in the hands of the company under clause (xvi) and not under clause (x) -- Held yes --Construction of section 10(2) (x) -- Bonus or commission of ex gratia nature stand to be reviewed with reference to pay of employee and conditions of his services - Services rendered not in capacity of an employee in terms of his conditions of service - To be considered under provisions of section 10(2) (xvi) - Corresponding Sections: Income-tax Ordinance, 1979 -- Sections 23(1) (viii), 23(l)xvii) -- ORDER (The order was passed by A. AHMED, Accountant Member). These two appeals arise out of a consolidated order of the Appellate Assistant Commissioner,,. The appellant is a private limited Company and it derived income from freight brokering. The objections taken are of common nature. These are directed against disallowance of commission of Rs. 9,443 and Rs. 9,280 for the charge years 1964-65 and 1965-66 respectively. 2. The payments of commission were made to Mr. A,,, who was the Secretary of the appellant-company. The assessee submitted that the payments under consideration were "made to him over and above his ordinary salary as commission for the work that is procured through him". The Income-tax Officer disallowed the claims on the grounds that Mr. A,,..was a full time employee and that his salary of Rs. 1,000 per month was decent and that there was no written contract for payment of commission. The Income-tax Officer also thought that the employee was related to one of the Directors. The Income-tax Officer further noticed that no commission was paid to any other employee. The Appellate Assistant Commissioner however found that Mr. A ,,,,,. Was not related to any shareholder or any Director of the Company. In support of the payments, an extract from the minute of extraordinary general meeting of the shareholders held on 9.2.1962 was…

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