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TMI Blog1992 (3) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... did not continue patronage enjoyed by the assessee on account of nuisance value of petty employees of the press. The secret commission was paid to these petty employees, whose wages were not significant, to have their continued patronage for the company's products. The payments were made through assessee-company's Senior Sales Officers who acknowledged the same on internal payment vouchers. The names of the persons to whom the commission was ultimately paid was, however, not recorded. The AO observed that it was not known whether the payment actually reached to the persons at all. He was also of the opinion that payment of such secret commission was against public policy and therefore could not be allowed as revenue expenditure. He, therefore, disallowed the entire claim of deduction of secret commission amounting to Rs. 5,20,055 as against only a part of disallowance in earlier years. 4. When the matter went to the CIT (Appeals) it was submitted before him that the Assessing Officer could not have departed from the past history of the case and disallowed the entire claim. The expenditure was in fact being incurred and it was wholly and exclusively for business purposes. The int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of discussions was given on pages 4 to 6 of the Paper Book. The modus operandi of the payments was explained in detail by them. The computation of commission paid to salesmen took into account. The secret commission and the amount was mentioned in the concerned internal competition sheets. 6. The learned counsel for the assessee thereafter invited attention to the decision of the Tribunal in Indira Agencies [IT Appeal No. 2282 (Bom.) of 1984] dated 10-11-1987, which had business as retailer in roller, printing ink for printing presses. Secret commission had been allowed as adeduction. Similarly, secret commission had been allowed by the tribunal in the case of D.S.V. Chemicals(P.) Ltd. [IT Appeal No.4897 (Bom.) of 1985, dated 28-9-1989] and Rainbow Ink Varnish Mfg. Co. [IT Appeal No. 3848 Bom. of 1985 dated 28-4-1989]. The last mentioned company was manufacturing various types of inks and varnishes. Finally the learned counsel relied on the decision of the Bombay High Court in CIT v. Goodlass Nerolac Paints Ltd. [1991] 188 ITR 1 and submitted that the Supreme Court had rejected the S.L.P. in this case in CIT v. Goodlass Nerolac Paints Ltd. [S.L.P. (Civil) Nos. 15931-15932 of 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whom the commission was alleged to have been paid were not disclosed to the Income-tax Officer. It was held that the burden was on the assessee to prove that expenditure was laid out wholly and exclusively for the purpose of business and the Tribunal was justified in not accepting that the assessee had, in fact, paid the amounts by way of secret commission. Therefore, the Tribunal was right in disallowing the claim for a deduction of selling expenses paid by way of secret commission. In the second case, again there was failure to furnish information regarding names and addresses of recipients of commission. However, the Tribunal found as a fact that commission was paid wholly for the purposes of business and allowed the commission. The finding of the Tribunal was confirmed by the High Court. Their Lordships referred to the facts of the earlier decision and the facts of the later decision and observed as below : "It cannot perhaps, be disputed that, in order to be entitled to deduction of payments to persons whose names are not disclosed, the assessee has to establish the practice prevailing in that line of business for making such payments, it has to adduce satisfactory evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowability of the claim for deduction, we decline to interfere, as the conclusion of the Tribunal is a finding of fact and is based on cogent material." 11. It is therefore clear that the question of payment of commission has to be determined by die Tribunal as a question of fact taking into account all the attendant facts and circumstances of the case. In the present case we have the confirmations from the two salesman, Shri S.S. Nadkarni and Shri D.K. Harpalani before the Assessing Officer, the internal vouchers prepared by the assessee containing signature of the assessee company's sales men and the person who authorised it, the computation of salesman's commission with signatures of the salesman, sales executive and the General Manager, where the secret commission is also a part of the computation, and the past history of the case to support the genuineness of the payments. However, the past history also shows that the entire amount was not being treated as genuine payment and therefore a part was being disallowed. The percentage of disallowance from year to year at a glance from assessment years 1981-82 to 1984-85 is given below : ------------------------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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