Allowability of commission expenditure as business deduction raised a referable question of law under income-tax provisions.

Commission expenditure claimed by the assessee was treated as fictitious and disallowed, and the Tribunal sustained the disallowance while also noting that any legitimate expenditure incurred by Ganesh Sales Agency could still be quantified and allowed. The High Court held that these facts gave rise to a referable question of law on whether the expenditure incurred by the agency was allowable as business expenditure of the assessee under the Income-tax Act. The question was answered in the affirmative, and reference was permitted.

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Issues: Whether the Tribunal's decision on the allowability of expenditure incurred by Ganesh Sales Agency as business expenditure gave rise to a referable question of law under section 256(2) of the Income-tax Act, 1961.

Analysis: The assessee's claim for commission expenditure had been disallowed as fictitious by the Income-tax Officer and the disallowance was upheld in appeal. The Tribunal affirmed that the commission payment could not be allowed as a deductible business expenditure, though it observed that the legitimate expenditure incurred by Ganesh Sales Agency deserved allowance and remanded the matter for quantification. On these facts, the Court found that the Tribunal's view did raise a question of law as to whether the expenditure incurred by the agency was allowable as business expenditure incurred by the assessee.

Conclusion: The question of law was answered in the affirmative, and the application for reference was allowed.

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