1984 (1) TMI 29 - HC - Income Tax

Summary

Issues Involved:
1. Disallowance of commission paid to Shri Naresh K. Patel.
2. Tribunal's finding on the commission paid being perverse.
3. Tribunal's refusal to entertain the argument regarding deducting actual expenses from gross receipts for computation of manufacturing profits u/s 80-I.

Summary:

Issue 1: Disallowance of Commission Paid to Shri Naresh K. Patel

The Tribunal disallowed the commission of Rs. 14,250 paid to Shri Naresh K. Patel. The ITO and AAC found no evidence of services rendered by Patel, citing his solitary role as a broker, the direct purchase assertion by M/s. Arvind Mills Ltd., absence of an agreement, lack of business expediency, and Patel's failure to file a return. The Tribunal upheld these findings.

Issue 2: Tribunal's Finding on the Commission Paid Being Perverse

The High Court noted that the Tribunal's finding that the commission was not for services rendered was challenged as perverse. The court observed that Patel's statement on oath, corroborated by a letter from Arvind Mills, indicated that Patel introduced the supplier to the purchaser and negotiated the order. The court found that the Tribunal ignored this uncontroverted evidence, making its finding unreasonable. Thus, the court concluded that the assessee-company was entitled to the commission deduction, answering question No. 2 in favor of the assessee and against the Revenue.

Issue 3: Tribunal's Refusal to Entertain Argument on Deducting Actual Expenses

The Tribunal rejected the assessee's alternative claim to deduct actual expenses from gross receipts for computing manufacturing profits u/s 80-I, considering it a new claim not raised before lower authorities. The High Court disagreed, citing the Supreme Court's ruling in CIT v. Mahalakshmi Textile Mills Ltd., which allows the Tribunal to determine questions not raised before departmental authorities if they relate to the assessment. The court held that the Tribunal should have considered the alternative claim, answering question No. 3 in favor of the assessee and against the Revenue.

Conclusion:

The High Court ruled in favor of the assessee on all issues, allowing the commission deduction and directing the Tribunal to consider the alternative claim regarding actual expenses for u/s 80-I computation. The Commissioner was ordered to pay the costs of the reference to the assessee.