1984 (2) TMI 354 - HC - Income Tax

Tribunal decision on business expense deduction upheld by Court, emphasizing Tribunal's role as fact arbiter.

Commissioner of Income-tax Versus Mills Stores Trading Co. India (P.) Ltd.

Commissioner of Income-tax Versus Mills Stores Trading Co. India (P.) Ltd. - TMI Issues:- Deduction of secret commission paid by the assessee to employees of various mills for income tax assessment purposes.Analysis:The judgment pertains to an application under section 256(2) of the Income-tax Act, 1961, seeking direction for the Tribunal to state a case and refer questions regarding the deduction of a specific amount as secret commission for determination by the Court. The primary dispute revolves around whether an amount of Rs. 26,112 should be allowed as a deduction from the assessee's total income. The assessee, engaged in supplying mill stores to various mills, claimed this sum as a deduction for secret commissions paid to employees of mills purchasing goods from the assessee. The Income Tax Officer (ITO) initially disallowed the deduction, citing lack of evidence establishing the payment's connection to the assessee's business. However, the Commissioner (Appeals) overturned this decision, which was subsequently upheld by the Tribunal, leading to the current application challenging the Tribunal's order.The critical issue before the Court was the existence of evidence proving the payment of the secret commission and its direct link to the assessee's business. The Tribunal's decision was based on the assessee's submission that the board of directors had approved these payments, which had been a recurring practice without objection from the tax department in previous years. Additionally, the assessee provided a detailed list of mills, agents, and employees receiving the commission, along with the value of goods sold to these mills. Despite the non-disclosure of individual names to protect the employees from potential repercussions, the Tribunal found sufficient circumstantial evidence indicating a connection between the payments and the assessee's business activities.Referring to a previous case, the Court emphasized the Tribunal's role as the final arbiter of facts and upheld its findings unless unsupported by evidence. In this instance, as the Tribunal believed the assessee's claims regarding the payments and their business nexus, the Court declined to interfere with the factual determinations made by the Tribunal. Consequently, the Court discharged the rule with costs, affirming the Tribunal's decision to allow the deduction of Rs. 26,112 as a valid business expense for income tax assessment purposes.