Benami ownership and commission deduction principles: proof of real ownership is required, and only actual or accrued liabilities are deductible.

In a benami inquiry, the Department must prove by direct or circumstantial evidence that the ostensible owner is not the real owner; mere disbelief of the wife's explanation for the purchase funds was insufficient, so the finding that the assessee contributed half the price was unsupported. A commission deduction at 25 per cent of net profits was allowable only for actual payment or an accrued liability recognised by law; because the enhanced commission had not been paid on the revised profits, the deduction was disallowed.

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Issues: (i) Whether, on the facts found, there was material to hold that the assessee had contributed half of the consideration for the house standing in his wife's name and that half of the income from that house was assessable in his hands. (ii) Whether the commission payable to an employee at 25 per cent of net profits could be deducted on the basis of profits as finally determined by the income-tax authorities, notwithstanding that the amount had not been paid on that basis.

Issue (i):

Analysis: The burden lay on the Department to prove that the wife was only a benamidar. Where property stands in the wife's name, the presumption is that she is the owner, and that presumption can be displaced only by direct or circumstantial evidence. Mere disbelief of the wife's explanation about the source of funds does not, by itself, establish that the husband contributed the balance of the purchase price, especially when no independent circumstances point to that conclusion.

Conclusion: The finding that the assessee contributed half of the purchase price was unsupported by material and was not justified; this issue was decided in favour of the assessee.

Issue (ii):

Analysis: A deduction is allowable only for amounts actually spent or paid, or for a liability that has arisen in the relevant manner recognised by the Act. Since the assessee had not paid the additional commission on the enhanced profits and merely anticipated liability on a revised basis, the amount could not be deducted from the profits determined by the income-tax authorities.

Conclusion: The claimed deduction was not allowable on the enhanced profits; this issue was decided against the assessee.

Final Conclusion: The reference was answered partly in favour of the assessee and partly against him, with no order as to costs.

Ratio Decidendi: In a benami inquiry, the taxing authority must prove by evidence that the ostensible owner is not the real owner, and mere rejection of an explanation does not amount to proof; a deduction is allowable only for an actual expenditure or enforceable liability, not for a merely anticipated payment based on reassessment of profits.

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