1990 (10) TMI 19 - HC - Income Tax

Accounting, Business Expenditure, Commission, Disallowance, Method Of Valuation Of Work-in-progress

Summary

Issues:
1. Dispute over the admissibility of sole selling agency commission as business expenditure.
2. Evaluation of the method of valuation of work-in-progress.
3. Dispute regarding the commission paid outside India under section 35B(2)(b).
4. Disallowance of expenditure under section 40(c) due to deletion of addition in the director's personal case.
5. Deletion of addition on account of "on money" earned by the company.
6. Deletion of addition on account of under valuation of stock due to alleged charging of "on money."

Analysis:

1. The petitioner sought reference of several questions to the court, including the admissibility of sole selling agency commission as business expenditure. The Tribunal referred only question No. 3 to the court, and the petitioner filed an application under section 256(2) for the remaining questions. The court found that the questions were predominantly factual in nature and not questions of law, as similar views had been taken in previous orders by the Tribunal. Therefore, the court dismissed the application related to this issue.

2. The court addressed the evaluation of the method of valuation of work-in-progress, which was question No. 2. The Tribunal had concluded that the method adopted by the assessee was reasonable. The court reiterated that this was a factual finding, and no legal question arose from it.

3. Question No. 4 involved the disallowance of expenditure under section 40(c) due to the deletion of an addition in the director's personal case. The court determined that since the addition in the director's case had been deleted, the expenditure incurred by the company was for business purposes and was rightly allowed. Therefore, the court held that no legal question arose from this issue.

4. The court considered the dispute over the deletion of addition on account of "on money" earned by the company, which was question No. 5. The Tribunal had found, based on the evidence, that no such amount was earned by the company. The court emphasized that this was a factual determination, and no legal question was involved.

5. Regarding question No. 6, which related to the deletion of addition on account of under valuation of stock due to alleged charging of "on money," the court noted that this issue depended on the previous question regarding the company earning "on money." The court agreed with the Tribunal's conclusion that there was no legal question involved in this issue. Consequently, the court dismissed the petition, stating no order as to costs.