Estimated deduction for commission income accepted at 40% where the agency business lacked regular expenditure records.

Where a commission agency business had no regular books or itemised expenditure records, a percentage-based deduction was accepted as a reasonable estimate of expenses incurred to earn commission income. The extensive territory covered by the agency work, the assessee's support for the estimate before the lower authorities, and the fact that similar deductions had been accepted in later years under section 143(1) supported the higher claim. On those facts, expenditure was allowed at 40% of the commission receipts.

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Issues: Whether, on the facts of the assessee's commission agency business, expenditure incurred for earning commission income should be estimated at 40% of the commission receipts.

Analysis: The assessee had no regular accounts or particulars of expenditure and claimed a percentage-based deduction. The territory covered was extensive, and the estimated claim had been supported before the lower authorities. The fact that similar deductions had been accepted in subsequent years under Section 143(1) of the Income-tax Act, 1961 was also taken into account. In these circumstances, the higher estimate claimed by the assessee was found to be reasonable.

Conclusion: The issue was decided in favour of the assessee, and expenditure was allowed at 40% of the commission income.

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