9911796707
TMI Blog1971 (12) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... REDDY. JUDGMENT The judgment of the court was delivered by A. D. V. REDDY J.- This reference under section 66(1) of the Indian Income-tax Act of 1922 has been made by the Income-tax Appellate Tribunal at the instance of the department for answering the following question : " Whether, on the facts and in the circumstances of the case, the commission paid by the assessee to the Mineral Products Co. of Calcutta was allowable as a business expense laid out wholly and exclusively for the purpose of its business ? " The assessee is a firm operating as shipping, clearing and forwarding agents at the Machilipatnam Port. As it was in need of securing business from M/s.General Produce Co. Ltd., it had approached M/s. Mineral Products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure and disallowed the same. On appeal, the Appellate Assistant Commissioner considered it to be comparable to an acquisition of goodwill and as asset of a capital nature and upheld the decision of the Income-tax Officer. But, the Tribunal on further appeal found that there is nothing in the contracts between the parties to suggest conferring of any right in the nature of monopoly on the assessee-firm, that it was not in the nature of capital payment, that it should only be treated as ordinary brokerage paid for securing additional business and as such constitutes revenue expenditure allowable under section 10(2)(xv) of the Indian Income-tax Act of 192. Hence, this reference. The assessee-firm had entered into an agreement with M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manency, i.e., whether the capital of the company or its assets or its goodwill is permanently increased by reason of such expenditure and it was a tangible asset for the enduring benefit of the trade. The learned counsel for the department relied on two decisions for his contention that the commission paid in this case is in the nature of a capital expenditure. R. M. G. Sundararamier Radhakrishnier Co. v. Commissioner of Income-tax is a case where the assessee had entered into an agreement with another for procuring him the licence for exporting goods to Ceylon and had undertaken to pay 50 per cent. of the profits realised and when he claimed the amount paid to the person who procured him the business as revenue expenditure, the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng agent. His contract with the General Produce Co. Ltd. was only one of the transactions during the course of the business done by him and that too only with regard to the shipping of particular tonnage of iron ore. It is to procure this business that the assessee had entered into an agreement with M/s. Mineral Products Co., and had agreed to pay commission at Rs. 1.25 per ton with respect to the goods of M/s. General Produce Co. Ltd., that was being shipped, from Machilipatnam Port and this obligation was to run concurrently with the contract with M/s. General Produce Co. Ltd., and admittedly this lasted only for one year and eight months. It cannot be contended that this had resulted in an expansion of the assessee's business and has, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
