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TMI Blog1978 (6) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Essential Commodities Act, 1955, and the amendments to the Sugarcane (Control) Order, 1955, on the 23rd September, 1958, and the letters dated the 28th December, 1964, and 11th April, 1967, of the Government of India, the Tribunal erred in holding that liability for payment of Rs. 52,556.80 as additional price for sugarcane accrued during the previous year ended on 30th September, 1960, and was allowable as deduction for the assessment year 1961-62. 2. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the payment of Rs. 63,770 to M/s. Indian Sugar Supplying Agency and Rs. 3,986 to Sri S. S. Singhania was an allowable deduction under s. 10(2)(xv) of the Indian Income-tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pay to the latter brokerage at the rate of 0-1-0 (one anna) on all sugar sold and delivered through the agent as long as the agreement between the assessee and the agent would subsist. Such brokerage had to be paid in the first week of November every year on the quantities of sugar sold and delivered up to the 30th September of every year. Daring the relevant assessment year, the assessee paid to the agent a sum of Rs. 70,896 by way of commission and a sum of Rs. 3,986 to the said B. P. Singhania as brokerage. In the assessment proceedings for the said assessment year, the ITO found that the Central Government had imposed controls over price, distribution and movement of sugar which were in force during the relevant period. The proced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AC that control on sugar was removed on September 28, 1961. The AAC, however, did not accept the contentions of the assessee and confirmed the order of the ITO. A further appeal was preferred to the Income-tax Appellate Tribunal by the assessee. The Tribunal took note of the following facts. The agreements in question had been entered into by and between the parties on the 14th May, 1959, whereas the control was imposed on the 27th July, 1959. Such control was removed with effect from the 28th September, 1961, but reimposed from the 17th April, 1963. Subsequently, on and from the 1st November, 1967, there was partial removal of the control. The Tribunal did not accept the finding of the ITO that the contract between the parties was void f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to distinguish the case of Jaswant Sugar Mills Ltd. [1970] 78 ITR 154 (All) on facts. The facts in that case were that the assessee, a company which manufactured sugar, had appointed a sole selling agent for sale of sugar on commission. Subsequent thereto, control on sale of sugar was imposed whereunder the assessee had to supply sugar in accordance with the directions of the Government. During the relevant assessment years, when such control was in force the assessee paid commission as stipulated to the selling agent and claimed deduction of the same as business expenditure. The claim of the assessee was rejected by the revenue authorities and also the Tribunal. On a reference, the Allahabad High Court noted that the agent duly maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aluminium Corporation of India Ltd. v. CIT [1972] 86 ITR 11. The facts in that case were, inter alia, that by an agreement the assessee had appointed a sole selling agent for an initial period of 5 years who was entitled to commission on the sale of all products whether made through agents or directly to the customers. The agents would, however, remain responsible for payment of the price due from the purchasers and also for the due fulfilment of all contracts by the assessee including all loss and damages arising from the breach of such contracts. In the relevant assessment year, the income-tax authorities had disallowed the claim for deduction of the commission paid to the agent on the sole ground that in that year all sales had been effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. It is nobody's case that the control as was imposed by the Central Government in 1959 was meant to continue permanently. The bona fides of the agreement between the assessee and its agent have also not been challenged. For the reasons given above, we hold that the commission paid to the agent was backed by adequate commercial consideration and that the expenditure incurred by the assessee under the agreement was expedient for the purpose of the business of the assessee. The brokerage paid to Singhania was ancillary to the agreement between the assessee and its agent. If payment of commission to the sole selling agent was justified, the brokerage paid to Singhania must necessarily be allowed. For the reasons given above, we answer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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