9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (3) TMI 368 - SC - Income TaxDisallowance of commission purportedly paid to commission agents for procurement of order for supply of liquor - deduction under Section 37 - questions reframed by the High Court have been answered against the appellant-assessee and in favour of the revenue - whether the High Court could have reframed the questions after the conclusion of the arguments and that too without giving an opportunity to the assessee? - Held that - A reading of the questions initially framed and subsequently reframed show that what was done by the High Court is to retain three out of twelve questions, as initially framed, while discarding the rest. Some of the questions discarded by the High Court were actually more proximate to the question of perversity of the findings of fact recorded by the learned Tribunal, than the questions retained. From a reading of the Order of the High Court it is clear that the High Court examined the entitlement of the appellant assessee to deduction/disallowance by accepting the agreements executed by the assessee with the commission agents; the affidavits filed by C. Janakiraman and Shri A.N. Ramachandra Nayar, husbands of the two lady partners of RJ Associates and also the payments made by the assessee to RJ Associates as well as to Golden Enterprises. The question that was posed by the High Court was whether acceptance of the agreements, affidavits and proof of payment would debar the assessing authority to go into the question whether the expenses claimed would still be allowable under Section 37 of the Act. This is a question which the High Court held was required to be answered in the facts of each case in the light of the decision of this Court in Swadeshi Cotton Mills Co. Ltd. Vs. Commissioner of Income Tax 1966 (9) TMI 30 - SUPREME Court and Lachminarayan Madan Lal vs. Commissioner of Income Tax West Bengal 1972 1972 (9) TMI 4 - SUPREME Court werein held that mere existence of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, does not bind the Income Tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessee's business. Although there might be such an agreement in existence and the payments might have been made. It is still open to the Income tax Officer to consider the relevant facts and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under Section 37 of the Act. The true effect of the Government Circulars along with the agreements between the assessee and the commission agents and the details of payments made by the assessee to the commission agents as well as the affidavits filed by the husbands of the partners of M/s. R.J. Associates were considered by the High Court. The statement of the Managing Director of Tamil Nadu State Marketing Corporation Ltd. (TASMAC Ltd.), to whom summons were issued under Section 131 of the Act, to the effect that M/s. Golden Enterprises had not done any liaisoning work with TASMAC Ltd. was also taken into account. The basis of the doubts regarding the very existence of R.J. Associates, as entertained by the Assessing Officer, was also weighed by the High Court to determine the entitlement of the assessee for deduction under Section 37 of the Act. In performing the said exercise the High Court did not disturb or reverse the primary facts as found by the learned Tribunal. Rather, the exercise performed is one of the correct legal inferences that should be drawn on the facts already recorded by the learned Tribunal. The questions reframed were to the said effect. The legal inference that should be drawn from the primary facts, as consistently held by this Court, is eminently a question of law. - Appeal dismissed.
Issues Involved:
1. Reframing of questions by the High Court after the conclusion of arguments. 2. Jurisdiction of the High Court to set aside the order of the Tribunal in its Reference Jurisdiction. 3. Correctness of the High Court's exercise of jurisdiction in re-appreciating evidence and reversing the Tribunal's findings. 4. Entitlement of the assessee to deductions under Section 37 of the Income Tax Act, 1961. Detailed Analysis: 1. Reframing of Questions by the High Court: The appellant contended that the High Court erred in reframing questions after the conclusion of arguments without giving an opportunity to the assessee, citing the precedent set in M. Janardhana Rao vs. Joint Commissioner of Income Tax (2005) 2 SCC 324. The Supreme Court noted that while the decision in M. Janardhana Rao pertained to Section 260-A of the Act, the principles could apply to Section 256 as well. However, the Court found that the High Court's reframing of questions was appropriate and did not violate procedural fairness. 2. Jurisdiction of the High Court to Set Aside the Tribunal's Order: The appellant argued that the High Court exceeded its Reference Jurisdiction by setting aside the Tribunal's order, referencing C.P. Sarathy Mudaliar vs. Commissioner of Income Tax, Andhra Pradesh 1966 Vol. LXII ITR 576. The Supreme Court agreed that the High Court's role in Reference Jurisdiction is advisory and not appellate. However, it concluded that the error was one of form rather than substance since the High Court had answered the questions of law appropriately. 3. Correctness of the High Court's Exercise of Jurisdiction: The appellant challenged the High Court's re-appreciation of evidence, arguing that the High Court improperly assessed the Tribunal's findings without a question of perversity being raised. The Supreme Court noted that the High Court did not disturb the primary facts found by the Tribunal but instead focused on the correct legal inferences from those facts. The Supreme Court found no fault with the High Court's approach, stating that determining the legal inference from primary facts is a question of law. 4. Entitlement to Deductions under Section 37: The core issue was whether the assessee was entitled to deductions for payments made to commission agents under Section 37 of the Income Tax Act. The High Court had examined the agreements, affidavits, and payments made by the assessee, as well as Government Circulars regulating such transactions. The High Court concluded that the assessee had not discharged the burden of proof required for such deductions, a decision the Supreme Court upheld. The Supreme Court agreed that the High Court correctly applied legal standards, referencing Swadeshi Cotton Mills Co. Ltd. vs. Commissioner of Income Tax 1967 (63) ITR 57 and Lachminarayan Madan Lal vs. Commissioner of Income Tax West Bengal 1972 (86) ITR 439. Conclusion: The Supreme Court dismissed Civil Appeal No. 1569 of 2007, affirming the High Court's judgment. Consequently, Civil Appeal No. 3214 of 2011 and SLP (C) No. 10080 of 2014 were also dismissed. The High Court's reframing of questions, exercise of jurisdiction, and conclusions on the assessee's entitlement to deductions under Section 37 were upheld as legally sound and procedurally fair.
|
