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TMI Blog2015 (4) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the commission on sales paid by the assessee could not have been subject to provisions of Section 40[c][iii] of the Income Tax Act, 1961. Here, we have to also take note of the finding reached by the CIT (Appeals), in paragraph no.4 that the commission paid was not excessive or unreasonable. Infact CIT (Appeals) has held that first limb of the counsel is arguments before it had succeeded. We therefore, find its disallowance under Section 40[c] not permissible. - Decided in favour of the assessee - INCOME TAX REFERENCE No. 21 OF 1993. - - - Dated:- 9-4-2015 - B. P. Dharmadhikari And S.B. Shukre, JJ. For the Appellant : K.P. Dewani For the Respondent : Mr. Anand Parchure, Advocate for Respondent. Oral Judgment. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, the view taken is in facts and circumstances of the said matter and in some cases question was about deduction on payment of gratuity. Here the commission has been paid to the Directors of the assessee company, who were under its control, and though it is made in one lumpsum, its splitting every month is not prohibited. He has submitted that in this situation, when the Directors were being paid remuneration and commission has been paid over and above it, it is rightly subjected to section 40(c)(iii) of the Income Tax Act. 4. The facts are not in dispute. One B.N. Shaw (HUF), A.K. Jaiswal and M.K. Jaiswal have been paid commission to the extent disclosed in reference order. Reference order also mentions salary paid to B.L. Shaw and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd .vrs. CIT) has been followed. However, as reference before this Court is restricted to only Section 40[c], we are not required to look into any other provision. 6. Other Division Bench judgment of this Court reported at (1994) 210 ITR 770 (CIT .vrs. Colgate Palmolive (India) again considers the issue of retirement gratuity. This judgment is delivered by same Bench on same day i.e. the day on which SAPT Textile Produces (India) Ltd .vrs. CIT (supra), came to be decided. In this judgment, in paragraph no.11 the Division Bench has examined the question whether retirement gratuity to a retiring director in the relevant previous year can be considered as an expenditure, which can be subjected to Section 40A[5][c]. After considering the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there the Karanataka High Court categorically held that expenditure incurred by way of commission paid to the independent selling agent to act as an independent entrepreneur with an independent organization who is not subjected to control and supervision of the assessee for the services and facilities provided to him, cannot be considered as benefit, within the meaning of Section 40[c] of the Act. In paragraph no.6, after referring to the budget speech of the Finance Minister, Division Bench notices that the Hon'ble Apex Court has approved the decision of the Karnataka High Court and the paragraph from the judgment of Karnataka High Court quoted with approval by the Hon'ble Apex Court, has been reproduced. In para 8, the Divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In paragraph no.9, it is observed that so long as the agreement where under the said payments were made, is not held to be mere device or a mere screen, the said payments cannot be treated as payments made to the directors as directors [qua directors]. In paragraph no.10, portion of judgment of Karnataka High Court mentioned supra, has been reproduced. The Hon'ble Apex Court has approved the finding of Karnataka High Court that Section 40[c] refers to an expenditure incurred by making periodical payments to a person mentioned in that clause apparently for any personal service that may be rendered by him. 8. Gujarat High Court has in (2001) 251 ITR 364 (Guj) (CIT .vrs. Commercial Ahmedabad Mills Co. Ltd.), while accepting the view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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