Related-party commission disallowance upheld where no agreement, no extra work, and no commercial necessity were proved.

Commission paid to the husband of a partner of the assessee-firm was treated as a payment to a closely connected person falling within section 40A(2) of the Income-tax Act. As there was no contemporaneous agreement for such commission during the relevant year and no material showing extra work or commercial necessity, the Tribunal's finding that the payment was excessive and not allowable was supported by the record. The disallowance was therefore upheld and the issue was decided against the assessee.

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Issues: Whether commission paid to the husband of a partner of the assessee-firm was liable to disallowance under section 40A(2) of the Income-tax Act, 1961.

Analysis: The payment was made to a person closely connected with a partner of the firm, bringing the transaction within the scope of section 40A(2). The record showed no contemporaneous agreement providing for such commission during the relevant accounting year, and the material before the Tribunal did not establish that the payment was justified by extra work or by any corresponding commercial necessity. On the evidence, the Tribunal's finding that the amount paid was excessive and not allowable was supported by the record.

Conclusion: The disallowance of the commission was upheld and the question was answered against the assessee and in favour of the Revenue.

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