Deduction under section 37 selling agency commission: factual inquiry required; agreements not conclusive, tribunal's finding sustained.

Deduction under section 37 concerned the deductibility of selling agency commission where factual questions of firm existence and transport arrangements arose; the determination of whether an expenditure was laid out wholly and exclusively for business depends on facts and circumstances, not merely on existence of an agreement or payment, and the tax authority may assess evidentiary factors to decide deductibility. Discrepancies between a partnership deed and a selling-agency agreement justified treating the firm as coming into existence per the partnership deed, and the tribunals factual findings and refusal to state a case for the High Court were sustained.

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Issues: Whether any question of law arose from the Tribunal's order requiring it to state a case under section 256(1) of the Income-tax Act, 1961 in respect of the disallowance of selling agency commission claimed as expenditure under section 37.

Analysis: The Tribunal concluded as a matter of fact that the selling-agency arrangement was a make-believe device and not a genuine business arrangement, relying on several factual findings including discrepancy in dates between the alleged agreement and the partnership deed, composition of the selling-agency firm (presence of minors and relatives), common business address, lack of independent assets or transport, and doubts as to the credibility of oral evidence. The Tribunal considered the oral testimony but declined to accept it in light of surrounding circumstances; these were findings open to evaluation on the evidence. Established authorities permit interference only where a conclusion of fact is not supported by any legal evidence or is perverse. On the record, the Tribunal's conclusions were supported by material and were rationally open to it.

Conclusion: The Tribunal was not obliged to state a case under section 256(1), and the High Court was justified in refusing to call for a statement of case under section 256(2); no question of law requiring such a reference arose.

Final Conclusion: The appellate challenge to the Tribunal's factual conclusions fails and the appeal is dismissed.

Ratio Decidendi: A reference under section 256 is required only where a question of law arises from the tribunal's order; a tribunal's factual findings that are supported by evidence and are rationally possible do not give rise to such a question of law and need not be referred for the High Court's opinion.

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