1992 (10) TMI 269 - HC - Income Tax

Summary

Issues:
1. Accrual of extra amount on enhanced price of sugar in the relevant assessment year.
2. Deduction of commission paid to selling agent.
3. Disallowance of interest on delayed payment of provident fund.

Analysis:
1. The first issue pertains to the accrual of an extra amount on the enhanced price of sugar in the relevant assessment year. The Tribunal found that the difference in sugarcane price was subject to an interim order passed by the High Court, and the final disposal of the amount could only be done based on the High Court's order. Citing the decision in Dhampur Sugar Mills Ltd. v. CIT, the Court held that the amount in dispute must be put in an account not controlled by the assessee. Therefore, the Court ruled in favor of the assessee, stating that the amount had not accrued in the relevant assessment year.

2. The second issue revolves around the deduction of commission paid to the selling agent. The assessee claimed a deduction of commission paid to Bharat Vyopari Mandal for the sale of sugar. The Income Tax Officer (ITO) disallowed the claim, considering it as payment for extra commercial reasons. However, the Appellate Assistant Commissioner (AAC) accepted the contention of the assessee and deleted the addition. The Tribunal upheld the AAC's decision based on the genuineness of the agreement and payments made to the selling agent. The Tribunal rejected objections that there was no necessity for appointing a sole selling agent and that the agent did not render any service. As these objections were refuted with supporting evidence, the Court decided in favor of the assessee, upholding the deduction of commission paid to the selling agent.

3. The final issue concerns the disallowance of interest on delayed payment of provident fund. Referring to the decision in CIT v. Kamalapat Moti Lal, the Court held that payment of damages for late payment of provident fund under section 14B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, was akin to a penalty and not allowable as a business expenditure. Consequently, the Court ruled in favor of the revenue, disallowing the interest on delayed payment of provident fund. No costs were awarded in this matter.