9911796707
TMI Blog1997 (10) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable ?" 2. The assessee was engaged by M/s. Bata India Ltd. under an agreement dated 21st December, 1978, as manager of a retail shoe store of the company along with the repair and pedicure organisation in Coimbatore. The agreement designates the assessee as an employee and under the terms of the agreement, he was entitled to a fixed salary of ₹ 101 per week and a commission on the retail sales effected through the shoe staff at the rate of 1.60 per cent on shoes, accessories, toys, umbrella and banians. During the accounting year relevant for the assessment year 1981-82, the assessee received from his employer, the following amounts : Rs. Salary 13,859 Commission 21,987 Dearness allowance 1,775 Bonus 3,363 AECD refund 146 Interest on loan account 720 Interest on AECD refund 16 Total 41,866 The assessee, during the course of assessment proceedings for the assessment year 1981-82 claimed before the ITO that he has incurred the following expenses to earn the commission of ₹ 21,987 : Advertisement 4,250 Small gifts to children (customers) 1,115 Taxi/autorickshaw charges 4,865 Sweets to children 710 Telephone charges 310 Miscellane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggrieved by the order of the AAC, the Revenue preferred an appeal before the Tribunal, Madras. The Tribunal examined the terms of the agreement entered into between the assessee and the company, viz., M/s. Bata India Ltd. and after examining the relevant clauses of the agreement, it came to the conclusion that the agreement entered into between the assessee and the company was not a mere contract of employment but was a contract for service. The Tribunal, therefore, held that the amount received by the assessee as salary would be taxable under the head "Salary" but the amount received towards commission and profits on repair and pedicure section contemplated in the agreement was not liable to be charged under the head "Salary", but charged either under the head "Income from business" or under the head "Income from other sources". In this view of the matter, the Tribunal held that the assessee would be entitled to deduct all expenditure incurred for earning the amount in arriving at the income of the assessee. The Tribunal thus upheld the order of the AAC allowing the deduction to the assessee. 5. The Revenue has come before us challenging t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent also provides that the employee shall get a fixed salary and will be entitled to commission on retail sales effected under prescribed percentage on the sale of the shoes, accessories, toys, umbrellas and banians. The assessee was also entitled to profit of the repair work, provided he contributes to the company his share of 10 per cent of the turnover of the repair work. The assessee was also entitled to profit in the pedicure sector turnover. The agreement also stipulates that the assessee will be entitled to draw 100 per cent of his fixed salary and 90 per cent of the estimated commission less his contribution towards provident fund at the rate of 8 per cent on income-tax quantum as indicated in the data sheet through the fortnightly statement, irrespective of his achievement. The agreement stipulates that if the assessee's estimated income falls short of 90 per cent of the estimated commission for no fault or negligence on his part, the company agreed to pay him up to 90 per cent of the estimated commission. 10. It is not necessary to refer to all the clauses, but it is necessary to notice that out of the sales proceeds achieved by the shop, the assessee has to meet all rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss in the stores or in the repair and pedicure sections by fire, theft, burglary or breakage of plate glass, the assessee should investigate the matter immediately and settle the amount of loss estimated by local authorities. The assessee was obliged to furnish to the company all particulars about the fire, theft, burglary, etc. and he will be responsible if the company is of the opinion that such fire, theft, burglary or breakage had happened owing to the negligence or carelessness on the part of the assessee or any person acting under him. 11. The terms of the agreement clearly show that the assessee had to incur certain expenditure in carrying out the obligations under the agreement and for earning the commission, and the company prescribed a limit for the expenditure to be borne by the company and if there is any excess expenditure, it has to be borne by the assessee personally subject to the condition that the company may approve the expenditure if they are supported by proper vouchers. He is also entitled to the profits on the repair work and pedicure turnover except for sharing a percentage thereof with the company. He is also entitled to share the expenditure with the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it is necessary in each case to determine what is the nature and extent of the control to establish the relationship of employer and employee. The nature of control with reference to the relationship varies from business to business and it is incapable to define with precision the nature of control required to establish the relationship of employer and employee. As pointed out in Simmons' case ( supra), the greater the amount of control exercised over the person rendering the services by the person contracting that is a good ground to hold that it is a contract of service. The above proposition of law has been followed by this Court in the case of CWT v. V.D. Ramalingam [1995] 216 ITR 566. 13. Applying the principles of law laid down by the Apex Court as well as this Court, we are of the opinion that the assessee in the instant case has a greater freedom in his activities and there is a minimum control by the company over the activities of the assessee. The services rendered in the pedicure organisation by the assessee can be regarded as being discharged in his capacity as an employee. The Tribunal, after considering the terms of the agreement, has come to the conclusion that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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