Actual payment via agent treated as payment under section 18(3B): commission left with buyer satisfied statutory payment requirement.

Whether statutory requirement of payment for commission was met: court accepted documentary accounting and contract terms as supporting a factual finding that the seller bore commission liability and left the commission amount with the buyer who acted as collecting agent. Applying agency principles, the court treated retention of commission by the buyer on behalf of the principal as equivalent to payment to the principal, and held this satisfied the actual payment requirement of section 18(3B); the Income tax Officer's order was upheld on those factual findings.

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Issues: Whether the Income-tax Officer's order dated 12 March 1957 passed under section 18(3B) read with section 18(7) of the Income-tax Act is vitiated; specifically whether the petitioner made 'payment' of the commission within the meaning of section 18(3B) by leaving the commission amount with the buyer who acted as collecting agent for the commission.

Analysis: The Court examined the contract description, the rate clause showing price "19? pence less 2? per cent. commission", and the accounting entries where the full sale price was credited while Rs.10,777 was debited as an expense for commission. The Court found the contractual description equivocal and held that the Income-tax Officer's factual inference - that the petitioner bore liability for the commission and that Lababedi Textiles acted as collecting agent for the Pioneer Consolidated Company - could legitimately be drawn from the documentary entries. Assuming, for the purposes of argument, that section 18(3B) requires actual payment, the Court further analysed the manner of payment shown by the accounts: the petitioner received only the purchase price net of commission, leaving the commission amount in the hands of Lababedi Textiles who collected it for Pioneer Consolidated Company. The Court treated such leaving of the commission with the buyer acting as agent as equivalent to payment to the principal through its agent, and therefore as compliance with the actual payment requirement of section 18(3B).

Conclusion: The Court concluded that the Income-tax Officer's findings were supportable on the facts and that the requirements of section 18(3B) regarding payment were satisfied by payment through the buyer acting as agent; the petition was dismissed and the impugned order upheld.

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