TaxTMI 
TaxTMI 
2015 (3) TMI 368
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....me Tax Appeal No. 12 of 1999 and Income Tax Appeal Nos. 42, 44, 46 and 47 of 2001, in a like manner i.e. against the assessee and in favour of the revenue. Aggrieved by the aforesaid orders of the High Court of Karnataka which pertains to different assessment years, Civil Appeal No. 3214 of 2011 and Special Leave Petition (C) No. 10080 of 2014 have been filed by the assessee. In view of the fact that the decision of the Karnataka High Court in I.T.A. No. 12 of 1999 had followed the decision of the Kerala High Court impugned in Civil Appeal No. 1569 of 2007 and the decision of the Karnataka High Court in the subsequent appeals before it (impugned in Civil Appeal No. 3214 of 2011 and Special Leave Petition (C) No. 10080 of 2014) essentially follows the decision rendered in I.T.A. No. 12 of 1999, it will be necessary first to deal with the issues arising in Civil Appeal No. 1569 of 2007 and depending on the decision therein the remaining appeals will have to be accordingly answered. 2. Succinctly, the appellants are engaged in the manufacture and sale of beer and other alcoholic beverages. Certain States like Kerala and Tamil Nadu had established marketing corporations which were t....
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....d in the Reference, in the questions reframed by the High Court, the said question does not find any mention. Be that as it may, the High Court on the reasons recorded in its order dated 31.03.2005 thought it proper to reverse the findings and conclusions recorded by the learned Tribunal. Eventually, in the ultimate paragraph of its order the High Court after recording the conclusion that the "Tribunal has committed a grave error in not properly understanding the transaction entered into between the assessee and others" set aside the order of the Tribunal and upheld the order of the Commissioner (Appeals) and answered the questions in favour of the revenue by holding that the assessee had not discharged the burden so as to entitle it to deduction under Section 37 of the Act. Aggrieved, this appeal has been filed by the assessee. 6. Three propositions have been advanced before us on behalf of the contesting parties. The first is whether the High Court could have reframed the questions after the conclusion of the arguments and that too without giving an opportunity to the assessee. The answer to the above question, according to the appellant, is to be found in M. Janardhana Rao vs....
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....celing the penalty levied under Section 271(1)(c). Question as to perversity of the findings recorded by the Tribunal on facts was neither raised nor referred to the High Court for its opinion. The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction only if a question has been referred to it which says that the finding arrived at by the Tribunal on the facts is perverse, in the sense that no reasonable person could have taken such a view. In reference jurisdiction, the High Court can answer the question of law referred to it and it is only when a finding of fact recorded by the Tribunal is challenged on the ground of perversity, in the sense set out above, that a question of law can be said to arise. Since the frame of the question was not as to whether the findings recorded by the Tribunal on facts were perverse, the High Court was precluded from entering into any discussion regarding the perversity of the finding of fact recorded by the Tribunal." 9. In the present case, the High Court while hearing the Reference made under Section 256 (2) of the Act had set aside the order of the Tribu....
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....s not the above finding also based on surmised and conjectures like "that two sales officers of UB Group stationed at Madras did not do or at any rate could not have done any sub line service at the unit level" wrong, unreasonable and unsupported by materials? 8) Whether, on the facts and in the circumstances of the case is the increase in sales noted in paragraph 10 (page 18) of the order of the Tribunal based on the increase in the quantum or increases in price and if the increase in sales is based on an increase in price is not the same an irrelevant consideration and the order vitiated? 9) Whether, on the facts and in the circumstances of the case, should not the Tribunal have considered the contention of the Revenue that "ultimately Golden Enterprises has in turn appointed one Abhinava Agencies for doing such work and therefore Golden Enterprises did not have the necessary infrastructure to do the services" in its correct prospective without side treching the issue by observing "what happened between Golden Enterprises and Abhinava Agencies is not of the concern of the assessee...."and is not the above finding wrong and lacks prospective when the case behind entrustment ....
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....in the light of the decision of this Court in Swadeshi Cotton Mills Co. Ltd. Vs. Commissioner of Income Tax 1967 (63) ITR 57 and Lachminarayan Madan Lal vs. Commissioner of Income Tax West Bengal 1972 (86) ITR 439. In fact the High Court noted the following observations of this Court in Lachminarayan (supra): "The mere existence of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, does not bind the Income Tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessee's business. Although there might be such an agreement in existence and the payments might have been made. It is still open to the Income tax Officer to consider the relevant facts and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under Section 37 of the Act." 12. There were certain Government Circulars which regulated, if not prohibited, liaisoning with the government corporations by the manufacturers for the purpose of obtaining supply orders. The true effect of the Government Circulars along with the ....