Commercial expediency and factual findings barred reference on tyre-cord classification and brokerage deduction claims.
Finding that tyre-cord fell within item 20 of the Fifth Schedule was treated as a factual conclusion based on evidence and commercial understanding, so it did not raise a referable question of law. The Tribunal's view on brokerage deduction was likewise upheld as factual: the payments were genuine, brokerage was normal market practice, and no extra-commercial consideration was shown. Both issues were therefore treated as concluded by factual findings rather than legal questions, and the reference application was rejected.
Issues: (i) Whether the finding that tyre-cord manufactured by the assessee fell within item No. 20 of the Fifth Schedule to the Income-tax Act, 1961, gave rise to a referable question of law; (ii) whether the finding allowing brokerage as a deduction gave rise to a referable question of law.
Issue (i): Whether the finding that tyre-cord manufactured by the assessee fell within item No. 20 of the Fifth Schedule to the Income-tax Act, 1961, gave rise to a referable question of law.
Analysis: The conclusion that the tyre-cord was an automobile ancillary was reached by the Tribunal on appreciation of the evidence and on a commercial understanding of the product. There was no suggestion that the finding was unsupported by evidence or perverse. The finding was treated as one of fact, not as a question requiring reference.
Conclusion: No reference was directed on this issue, in favour of the assessee.
Issue (ii): Whether the finding allowing brokerage as a deduction gave rise to a referable question of law.
Analysis: The genuineness of the brokerage payments was not in dispute. The Tribunal held that it was for the businessman to decide how to conduct his business, that brokerage payments were a normal market practice, and that no material showed any extra-commercial consideration in engaging brokers or making the payments. The matter was therefore treated as one turning on facts and commercial expediency.
Conclusion: No reference was directed on this issue, in favour of the assessee.
Final Conclusion: The application seeking a reference was rejected because both questions were treated as concluded by factual findings of the Tribunal and not as referable questions of law.
Ratio Decidendi: A finding based on appreciation of evidence, especially one resting on commercial assessment and absence of perversity, does not ordinarily raise a referable question of law; genuine brokerage incurred in the ordinary course of business is not disallowed merely because it is said to be unnecessary or excessive.
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AI Drafter ✕
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