Income-tax---

----Reference---Business expenditure---Commission paid to sales agent-- Tribunal finding that services had been rendered by the sales agent---Tribunal justified in allowing deduction of commission---No question of law arose-- Indian Income Tax Act, 1961, Ss.37 & 256.

Held, that, in the instant case, there was material on record on which the Tribunal could, and did, come to the conclusion that there was rendition of service by Sin favour of the assessee. The approval of the Company Law Board had been obtained both with regard to the appointment of the sole selling agent as well as .the rate of commission payable. Furthermore, there were copies of bills which showed sales made by the assessee in favour of S and documents were also produced regarding the sales made, in turn, by S to other parties. The Tribunal was justified in allowing deduction of the commission paid to the sales agent. No question of law arose from its order.

Lachminarayan Madan Lal v. CIT (1972) 86 ITR 439 (SC) and Swadeshi Cotton Mills Co. Ltd. v. CIT (1967) 63 ITR 57 (SC) ref.

B. Gupta, R.K. Chaufla and D.C. Taneja for the Commissioner.

S.K. Aggarwal for the Assessee.

JUDGMENT

B.N. KIRPAL, J.---In respect of the assessment year 1966-67, the petitioner seeks a direction under section 256(2) of the Income Tax Act, 1961, to the effect that the Tribunal should be required to state the case and refer the following question to this Court:

"Whether, on, the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct both on facts and in law in allowing the assessee's claim of commission payment to M/s. Standard Electrode Corporation, ignoring the material fact that no services had been rendered by M/s. Standard Electrode Corporation to the assessee-company?"

It appears that in respect of the assessment year 1964-65, the payment made to M/s. Standard Electrode Corporation was disallowed by the Income tax Officer and that was upheld in appeals up to the Tribunal. In respect of the assessment year 1965-66 also, there was part disallowance which was upheld by the Tribunal. At the request of the assessee, the Allahabad High Court under section 265(2) of the Act called for reference of two questions and the same is pending in that Court.

For the assessment year in question, the assessee again agitated for the allowance of the deductions. The matter came up before the Income-tax Tribunal who remanded the case and asked the Commissioner of Income-tax to decide the case afresh. The Commissioner of Income-tax felt bound by the earlier decision of the Tribunal but took into consideration fresh evidence which had been produced by the assessee in respect of that year.

When the matter came up in appeal before the Tribunal, it was noticed by the Tribunal that in respect of the assessment year 1964-65, penalty proceedings had been initiated against the assessee. During those penalty proceedings, further material had been placed by the assessee and on the basis of that further material, the Tribunal had observed that no penalty was leviable, inter alia, for the reason that the payments to M/s. Standard Electrode Corporation had been made by cheques and there was evidence on record to show that services had been rendered by M/s. Standard Electrode Corporation to the assessee-company. The Tribunal took into consideration the papers which had been filed by the assessee the details of which, as per the order of the Tribunal, are as follows:

(1)Copy of resolution dated July 27, 1963,' appointing Standard Electrode Corporation as the assessee's sole selling agents (page 71 of the assessee's paper book).

(2)Copy of resolution dated November 11, 1963, approving appointment of sole selling agent alongwith explanatory note (pages 72 and 73)

(3)Copy of Company Law Board's letter, dated June 1, 1977, approving appointment of Standard Electrode Corporation as sole selling agent (page 87).

(4)Copy of the assessee's letter, dated May 10, 1967, to the Company Law Board regarding rate of commission (pages 88 and 89).

(5)Copies of bills/invoices made by the assessee in favour of Standard Electrode Corporation (pages 95 to 130).

(6)Sales tax assessment orders against Standard Electrode Corporation (pages 133 to 148).

(7)Break-up of sales of Standard Electrode Corporation (pages 149 and 150).

(8)Copy of audited annual account of Standard Electrode Corporation (pages 154 to 164).

(9)Copy of letter, dated February 22, 1965, from the Company Law Board to the assessee regarding terms and conditions of appointment of sole selling agencies (pages 183 to 185).

(10) Statement showing the commission paid to sole selling agents (page 186).

The Tribunal then observed as follows:

"Having regard to the above material, we are of the view that the disallowances were made and sustained by the income-tax authorities without any due basis and that on the basis of the material referred to above, it could not be said that there was no evidence of rendition of services by Standard Electrode Corporation or that requisite onus, which lay on the assessee, had not been discharged. The amounts have also not been shown to be wrong. Standard Electrode Corporation had suffered a bad debt of Rs. 3,870 during the assessment year 1972 73 and there was also doubtful debt for which M/s. Standard Electrode Corporation was in litigation and the Company Law Board had examined the matter in detail and approved the payment of commission to M/s. Standard Electrode Corporation from March, 1967. On account of these facts, we are of the view that the disallowance of commission for all the three years being unwarranted, the claims should be allowed. We hold accordingly."

Learned counsel for the petitioner has referred to the decisions of the Supreme Court in the cases reported as Swadeshi Cotton Mills Co. Ltd. v. CIT (1967) 63 ITR 57) and Lachminarayan Madan Lal v. CIT (1972) 86 ITR 439 and has contended that mere existence of an agreement is not sufficient to conclude that services were rendered and it was open to the Income-tax Officer to disregard an agreement, if, in fact, no services were rendered. Mr. Gupta submits that in the facts of the present case, no services were rendered by the selling agent.

In our opinion, as is evident from what has been extracted hereinabove, the Tribunal has referred to ten different types of papers which were filed in order to show that the assessee had received services from its sole selling agent. There was material on record on which the Tribunal could, and did, come to the conclusion that there was rendition of services by M/s. Standard Electrode Corporation in favour of the assessee. What is material, as rightly pointed out by the Tribunal, is that approval of the Company Law Board had been obtained both with regard to the appointment of the sole selling agent as well as the rate of commission payable. Furthermore, there were copies of bills which showed sales made by the assessee in favour of M/s. Standard Electrode Corporation and documents were also produced regarding the sales made, in turn, by M/s. Standard Electrode Corporation to other parties.

It is not possible, therefore, for us to come to the conclusion that any material evidence of facts was ignored by the Tribunal. Each assessment year is self-contained and as evidence had been produced in respect of the assessment year 1966-67, with which we are concerned in the present case, the Tribunal took that evidence into consideration, and has given a finding of fact and, in our opinion, no question of law arises.

The petition is accordingly dismissed.

No order as to costs.

M.BA./2382/TPetition dismissed.