1961 (12) TMI 106 - HC - Income Tax

Summary

Issues:
1. Interpretation of contractual terms regarding commission payment.
2. Determination of liability for commission payment.
3. Understanding the concept of "payment" under section 18(3B) of the Income-tax Act.

Detailed Analysis:
1. The petitioner sought a writ of certiorari to quash an order passed under section 18(3B) of the Income-tax Act related to a contract for the supply of cloth. The contract involved a commission payable to a company, and the Income-tax Officer found that the petitioner indirectly paid the commission through another party. The Income-tax Officer concluded that the petitioner was liable for the commission based on the contract terms and accounting entries. The court analyzed the contract description and the role of the parties involved to determine the validity of the Income-tax Officer's conclusion.

2. Two main arguments were raised by the petitioner's counsel to challenge the Income-tax Officer's findings. Firstly, it was argued that the description of the buyer in the contract indicated that the commission liability belonged to the buyer, not the petitioner. The court examined the contract terms and concluded that the description of the buyer did not definitively establish the liability for commission payment. Secondly, the petitioner argued that mentioning the commission in the contract was unnecessary if the liability was theirs. The court found this argument inconclusive, stating that the mention of commission did not solely determine liability. The court upheld the Income-tax Officer's findings as findings of fact that could not be challenged under a writ petition.

3. The petitioner contended that the word "payment" in section 18(3B) of the Income-tax Act referred to actual payment, not notional or indirect payment. Referring to a previous case, the petitioner argued that the payment made through another party did not constitute actual payment. However, the court determined that the manner in which the commission was handled, with the petitioner receiving the cloth price minus the commission through the other party, constituted payment to the commission agent. Therefore, the court concluded that the requirements of section 18(3B) regarding actual payment were met, and the petition was dismissed with costs.

In conclusion, the court upheld the Income-tax Officer's findings regarding the liability for commission payment and the concept of "payment" under section 18(3B) of the Income-tax Act, ultimately dismissing the petition.