1980 (2) TMI 106 - AT - Income Tax

Summary

Issues:
1. Disallowance of commission paid to employees
2. Claim of weighted deduction under s. 35B

Analysis:

Issue 1: Disallowance of Commission Paid to Employees
The case involved a departmental appeal regarding the disallowance of Rs. 30,000 out of commission paid to two employees of a partnership firm for the assessment year 1974-75. The employees had been paid salaries in the past but were now entitled to a commission based on the turnover of the Kariana Department. The Income Tax Officer (ITO) disallowed a portion of the commission, which was later reversed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Revenue contested this decision, arguing that the commission payment was excessive and uncalled for. However, the Appellate Tribunal held that since the genuineness of the payments was not doubted, and there was no relationship between the assessee and the employees in question, the CIT(A)'s decision did not require interference. Therefore, the Revenue's appeal on this ground was dismissed.

Issue 2: Claim of Weighted Deduction under s. 35B
The second ground of the Revenue's appeal related to the claim of weighted deduction under section 35B for various expenses. The CIT(A) had allowed most of the deductions except for Rs. 3,000 related to traveling expenses, which the ITO had disallowed due to personal elements. The Revenue accepted the CIT(A)'s decision except for the Rs. 3,000 traveling expenses. The Appellate Tribunal concurred that the disallowance of Rs. 3,000 for personal elements in traveling expenses was justified and should not have been granted weighted deduction by the CIT(A). Consequently, the Tribunal partly allowed the Revenue's appeal on this ground, reversing the weighted deduction granted for the Rs. 3,000 traveling expenses.

In conclusion, the Appellate Tribunal upheld the CIT(A)'s decision regarding the disallowance of commission paid to employees but partially allowed the Revenue's appeal concerning the claim of weighted deduction under section 35B by reversing the allowance of deduction for traveling expenses with personal elements.