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TMI Blog1969 (12) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... trol on the sale of sugar in August, 1949. The assessee-company had to supply sugar to dealers in accordance with the directions of the Government. The assessee-company paid full commission to the selling agent in spite of the fact that the Government had introduced control on the sale of sugar. When the Income-tax Officer took up assessment for the three assessment years, he took the view that it was not necessary to pay commission for the sale of controlled sugar. He, therefore, disallowed the expenditure to the extent of commission paid on the sale of controlled sugar. He also fixed the rate of commission on the sale of free sugar at the rate of 1 1/4 per cent. instead of the rate of 2 1/2 per cent. under the agreement. When the assessee took up the matter in appeal before the Appellate Assistant Commissioner, he raised the rate of commission on the sale of free sugar from 1 1/4 per cent. to 2 per cent. But he agreed with the Income-tax Officer that no commission was payable with respect to the sale of controlled sugar. When the assessee took 'up the matter in further appeal before the Appellate Tribunal, the Tribunal took the view that in view of the control imposed by the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of commission did not depend upon the amount of work done by the agent. Nor did clause 12 require that a particular product must have passed through the hands of the agent in order to enable it to earn the commission. The basis of the commission was the net value of the product supplied by the manufacturer. Clause 16 of the agreement dealt with the duration of the agreement. Clause 16 stated : "This agreement shall remain and continue in force and govern all transactions between the parties hereto for a period of one year or until cancelled or terminated in the manner hereafter expressed. This agreement may be terminated by either party by giving to the other party three months' notice to that effect ........." Annexure "E" to the statement of the case is a copy of the Tribunal's judgment, dated August 31, 1963, relating to the assessment year 1951-52. In Paragraph 3 of its judgment the Tribunal observed : "...... When control was introduced by the Government, since the assessee found that no useful purpose could be served by the selling agents there was a duty cast upon them to terminate the selling agency agreement and not incur any unnecessary expenditure on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the businessman and not of the income-tax department. The learned Advocate-General, appearing for the department, contended that the finding of the Tribunal that the expenditure, in question was not wholly and exclusively for purposes of the business of the company is binding on this court. For this contention, reliance was placed upon the decision of the Supreme Court in Commissioner of Income-tax v. Chandulal Keshavlal & Co. In that case Kapur J. observed on page 610 : "... it is a question of fact in each case whether the amount which is claimed as a deductible allowance under section 10(2)(xv) of the Income-tax Act was laid out wholly and exclusively for the purpose of such business and if the fact-finding Tribunal comes to the conclusion on evidence which would justify that conclusion, it being for them to find the evidence and to give the finding, then it will become an admissible deduction. The decision of such questions is for the Income-tax Tribunal and the decision must be sustained if there is evidence upon which the Tribunal could have arrived at such a conclusion." In Commissioner of Income-tax v. Royal Calcutta Turf Club the same learned judge referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has established two facts, viz., the existence of an agreement between the employer and the employee and the fact of actual payment, no discretion is left to the Income-tax Officer except to hold that the payment was made wholly and exclusively for the purposes of the business. Although the payment might have been made and although there might be an agreement in existence, it would still be open to the Income-tax Officer to take into consideration all, the relevant factors which will go to show whether the amount was paid as required by section 10(2)(xv)." In Commissioner of Income-tax v. Royal Calcutta Turf Club, the facts were these : The Royal Calcutta Turf Club was an association of persons whose business it was to hold race meetings on a commercial basis. The turf club itself did not own any horse or employ jockeys. As it was of opinion that there was a risk of jockeys becoming unavailable and that such unavailability would seriously affect its business, the turf club established in 1948 a school for the training of Indian boys as jockeys. During the relevant year the turf club spent a sum of Rs. 62,018 on the running of the school. It was held by the Supreme Court t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the work to be carried out by them." In paragraph 3 of the judgment the Tribunal referred to the fact that there was close connection between the constitution of the assessee-firm and the constitution of the National Finance Ltd., which was its selling agent. The Tribunal, however, does not appear to have attached much significance to this fact. After referring to the close connection between the two companies, the Tribunal observed : "Whatever it is, there is a clause in the agency agreement which the assessee-mills should have used in the present circumstances when it found that the selling agents would be of no use to the assessee." The Tribunal emphasized the fact that under clause 16 of the agreement it was possible to terminate the selling agency agreement. The Tribunal did not hold that the assessee was actuated by some oblique motive in keeping the selling agency alive even after enforcement of control on sugar. The sole reason given by the Tribunal for disallowing commission on the sale of controlled sugar was that the assessee ought to have terminated the selling agency agreement. As explained above, the omission of the assessee-company to terminate the selling ..... X X X X Extracts X X X X X X X X Extracts X X X X
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