(Appeal by special leave against the order dated June 20, 1977, of the Bombay High Court in I.TA. No. 66 of 1977).

Income-tax--

----Reference---Question of law---Business expenditure---Secret commission- Appellate Tribunal---Finding that assessee failed to establish that expenditure was incurred---No question of law arises---Indian Income Tax Act, 1961, Ss. 37 & 256.

The appellant, a private company engaged in the manufacture of chemicals and dyes, had claimed deduction of the sum of Rs.16,831 as having been paid as secret commission to dyeing masters, purchase officers and other workers in the textile mills to which the appellant supplied dyes and chemicals. The Appellate Tribunal found as a fact that the appellant had failed to establish that the amount was expended by it for the purpose indicated by it because of the following circumstances, viz., (i) the appellant failed to disclose the names of the recipients; (ii) the commission alleged to have been paid was not uniform:

Held, that since the appellant had not questioned the finding of fact that it had failed to establish that the expenditure claimed was in fact incurred, no question of law arose out of the order of the Tribunal.

P.H. Parekh and Sunil Dogra, Advocates for Appellant.

B.B. Ahuja, Senior Advocate (Ranbir Chandra and P.Parameswaran, Advocates with him) for Respondent.

JUDGMENT

This appeal is preferred by the assessee against an order of the Bombay High Court refusing to direct the Tribunal to state the following question of law under section 256(2) of the Income Tax Act, 1961:

(1) Whether, on the facts and in the circumstances of the case, the assessee-company's claim under section 37 for deduction of Rs.16,831 paid to the director for payment of commission to dyeing masters, purchase officers and others working in different textile mills to whom the assessee company supplied dyes and chemicals could be disallowed in determining the profits for the assessment year 1973-74?

(2) Whether the Tribunal was right in allowing Revenue authorities to raise for the first time the plea that the secret commission expenditure was not incurred for the purpose of the assessee-company's business?

(3)Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that there was no evidence that there was any practice of payment of secret commission to dyeing masters, purchase officers, etc., when in fact the Tribunal had accepted in general the position that such practice is prevalent in the colours and chemicals business?"

The assessee is a private company engaged in manufacture of chemicals and dyes. In the assessment relating to the assessment year 1973-74, it claimed deduction in respect of a sum of Rs.16,831, stated to have been paid by way of secret commission to dyeing masters, purchase officers and other workers in textile mills to whom the assessee supplied dyes and chemicals. This claim was negatived by the Income-tax Officer whereupon the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner allowed the appeal and remitted the matter to the Income-tax Officer for further enquiry giving an opportunity to the parties to adduce evidence in that behalf. After considering the evidence adduced by the assessee, the Income-tax Officer again rejected the claim for deduction. The matter was carried in appeal to the Appellate Assistant Commissioner and the Tribunal, but without success. An application under section 256(1) was also rejected by the Tribunal.. The assessee approached the High Court under section 256(2) and, on refusal by the High Court, it has filed this appeal.

A perusal of the Tribunal's judgment shows that it has found as a fact that the assessee has failed to establish that the said amount was expended by it for the purpose indicated by it. This finding is based upon more than one circumstance. The Tribunal has observed that not' only has the assessee failed to disclose the names of the recipients, even the commission allegedly paid is not uniform. In some cases, it is at .the rate of 2 per cent. It also pointed out that the mere fact that a certain amount was made available to the director is not sufficient in the circumstances to prove its payment inasmuch as, according to the assessee, the amounts were not paid out by the director himself but through other employees of the assessee. It observed that even the names .of the persons who have allegedly made payments to the dyeing masters have also not been disclosed. It is in view of these several circumstances that the Tribunal recorded the finding that the assessee has failed to establish that the said expenditure was in fact incurred. In view of this finding, the questions of law sought to be raised by the assessee do not arise. Question No. 1 is based upon the assumption that such payments are proved when it was not. We may also point out that none of the three questions suggested by the assessee seek to question the finding of fact recorded by the Tribunal.

In the circumstances, it cannot be said that the High Court was not justified in dismissing the application under section 256(2). The appeal is accordingly dismissed. No costs.

M.B.A./2447/TAppeal dismissed.