1953 (9) TMI 21

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....ee company and Kharawala. Under that agreement the assessee company agreed to pay to Kharawala 12? per cent. on net sales. This 12? per cent. included all contingency expenses which the representative had to bear himself. In 1935 this commission of 12? per cent. was split up and 5 per cent. was specifically allowed to the representative for making contingency expenses. A letter was written by the company to its representative on the 20th of October, 1947, in which it was stated that the 5 per cent. allowed to the representative was to meet contingency expenses, which, according to the assessee company, consisted to commission to dyeing masters, agents, etc., which had to be paid by the representative for the purpose of canvassing business. ....

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....which have got to be applied in order to determine whether the bonus or commission is a reasonable one or not. Now, in this particular case the finding of the Tribunal is that these two sums were actually paid by the assessee company to its representative. The agreement under which these amounts were paid has not been challenged as an agreement which is not a genuine agreement or not a bona fide agreement. It has not been suggested that the payment to the representative was not for the purpose of contingency expenses which the representative had to meet for paying commission to dyeing masters, agents, etc. The amount has not been allowed to be deducted by the assessee solely on the ground that it has not been proved that the representati....

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.... it is not necessary for him to prove the actual payment, in the case of an assessee claiming exemption under Section 10(2)(xv) proof of actual payment is necessary. But, with respect to the Tribunal, it has confused the notion of payment as emerges from that decision. It is perfectly true that there must be proof of actual payment, but payment by whom? Payment by the assessee to his representative as in this case but not proof of actual payment by the representative to the various persons he has got to pay in order to push the sales of the assessee company. The Tribunal has also, again, with respect to it, fallen in this error that it has taken the view that it is only if the department is satisfied that the representative has actually exp....