9911796707
TMI Blog1965 (11) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Appeal dismissed. - - - - - Dated:- 30-11-1965 - Judge(s) : K. SUBBA RAO., J. C. SHAH., S. M. SIKRI JUDGMENT The judgment of the court was delivered by SUBBA RAO J.-- This appeal by special leave is preferred against the judgment and order of the High Court of Bombay in a reference made to it by the Income-tax Appellate Tribunal under section 66(1) of the Indian Income-tax Act, 1922, hereinafter called the Act. The following question was referred to the High Court : "Whether, on the facts and in the circumstances of the case, the commission of Rs. 2,45,557 was exempt in the hands of the assessee by virtue of the Notification No. 878F dated March 21, 1922, as amended by Notification No. 8 dated March 24, 1928 ?" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been fulfilled and that the assessee was entitled to the exemption claimed by him. At the instance of the revenue, the aforesaid question was referred to the High Court for its opinion. The High Court agreed with the Appellate Tribunal and answered the question in the affirmative. Hence, the present appeal. Mr. Desai, learned counsel for the revenue, contended that, in order to qualify for the exemption under the aforesaid notification the assessee had to fulfil the conditions laid down therein, that he had not fulfilled any one of them and that, therefore, he was not entitled to any exemption. Mr. A. V. Viswanatha Sastri, learned counsel for the assessee, argued that, as the employer had been assessed on the same income as was now a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be taken into account in determining the total income of an assessee for the purposes of the said Act : (i) Sums received by an assessee on account of salary, bonus, commission or other remuneration for services rendered, or in lieu of interest on money advanced to a person for the purpose of his business. Where such sums have been paid out of, or determined with reference to the profits of such business, and by reason of such mode of payment or determination, have not been allowed as a deduction but have been included in the profits of the business on which income-tax has been assessed and charged under the head ' business ' ". Under this notification commission received by an assessee is exempt from tax if the following three co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than to ourselves." Prima facie this recital supports the contention that commission had to be paid not out of the profits but on the turnover of each sale. But the High Court held that, having regard to the nature of the business carried oil by Gallini, the incomings of the business were nothing but the profits earned by him in the sale transactions, and, therefore, the commission agreed to be paid to the assessee was only out of the profits of the employer's business. The reasoning of the High Court is found in the following observations : " . . . the trading assets of the assessee (employer) are the forward contracts made by him on the strength of his business contacts with foreign contractors. The benefits of these contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd assessed the total sum of Rs. 7,74,454 to tax. He did so, because in his view the commission was paid out of the profits to evade tax to that extent. It was said that the said finding of the Income-tax Officer was not conclusive and that the Tribunal should have given an independent finding in the present proceedings. Though the said finding was not conclusive, it would certainly prove that the income-tax department, after enquiry, found that the said commission was part of the profits of the employer. In the absence of any other evidence, the Tribunal accepted that finding and we do not see any justification to disturb the same. If so, it follows that the said commission was in fact paid out of the profits of the employer's business. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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