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TMI Blog2014 (1) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... n secret commissions would necessarily fall within the mischief of the explanation added to Section 37 of the Act. The Tribunal has decided the matter in a sweeping and general manner - The impugned order neither discusses the evidence nor takes into account any other facts and attending circumstances but there is only sweeping reference to its earlier judgments - When neither the incurring of expenditure as a fact under the two given heads has been properly accounted for nor application, in their relation and impact of Explanation added to Section 37 of the Act has been taken into consideration, the impugned order is legally vitiated - The issue has been set aside for fresh adjudication. - ITA No. 51 of 1999 - - - Dated:- 10-1-2014 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1990- 1991, the assessee inter-alia had sought/claimed deduction on account of commission paid to the tune of Rs.10,36,879/- claiming that these expenses were of secret nature and payments were made to educational institutions, teachers and individuals for promotion of sales of books. Similarly expenses of Rs.8,61,900/- had been claimed by the assessee as having been incurred with regard to supply of specimen copies of books (published by them) to the teachers. The Assessing Officer disallowed the expenditure made on payment of commission of secret nature to various schools for promotion of sales, but so far as the matter of expenses incurred on supplying specimen of books published by them was concerned, only expenses @ 2% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is claimed that such practice of spending on secret commissions and on distribution of free specimen books is an offence and there is specific prohibition in law with introduction of Explanation to Section 37 of the Act which has been made applicable retrospective, i.e., with effect from 1.4.1962. It is urged that even otherwise, there is no proper accounts for secret commissions nor of expenditure incurred on distribution of free books published by the assessee and, thus, order of the Tribunal is bad in law requiring reversal. Plea of the assessee in defending the expenses made on payment of secret commissions to various schools is that in the face of tough competition, such commission is necessary and is part of the business practic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by the assessee had in fact been spent and was reasonable, and being a pure finding of fact, had rejected the claim of the revenue. In short, this Court had come to the affirmed finding that no referable question of law had arisen. Consequently, the income tax references had been dismissed. In the present case, there is a marked difference when comparison is made to the assessment made in earlier assessment years. There are two issues. One concerns expenditure on commission paid secretly and the other one is about expenditure made on distribution of specimen copies of books published by the assessee. Yet another aspect concurrently relatable to these issues is as to whether payment of such secret commission or expenditure made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the gross turnover, decided the matter in a sweeping and general manner. Any secret transaction/payment that is made to secure an unfair advantage, would necessarily be repugnant to law. Transaction which is not transparent, offends normal business practice, must suffer scrutiny. Such unexplained and unvouched expenditure, if allowed, is likely to encourage illegal payments, evasion of tax and unscrupulous practices ushering in at both ends. The expenditure incurred on secret commissions would necessarily fall within the mischief of the explanation added to Section 37 of the Act. In the case in hand, without evaluating the evidence and approaching the attending circumstances, Commissioner of Income Tax (Appeals) as also Income Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced as below:- We have perused the newly added Explanation and considered the above submissions. We find merit in the submission of Mr. Desai, learned counsel for the Revenue that in view of the amendment to s.37(1) of the Act by the insertion of Explanation with retrospective effect from the inception of the Act, i.e. 1st April 1962, the matter requires consideration by the Tribunal. The Tribunal in this case has upheld the deduction of secret commission without satisfying itself that it was not incurred by the assessee for any purpose which is an offence or which is prohibited by law. Allowance of deduction under s.37(1) of the Act in respect of secret commission without a clear finding in this regard, in our opinion is not correct. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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