1996 (2) TMI 580

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....and R. Sivaramakrishnan, Advs. JUDGMENT V.V. Kamat, J. 1. Under Section 256(2), the Revenue seeks reference of the following question : "Whether, on the facts and in the circumstances of the case and on an interpretation of Section 37(3A) of the Income Tax Act, 1961, the commission paid on export sales is to be reckoned for purpose of disallowance under Section 37(3A) as forming part of ....

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....for rendering services after sales. Naturally it took the view that this amount relating to the payment of commission charges did not form part of the business promotional expenditure and had to be excluded from the purview of the provisions of Section 37(3A) of the Income Tax Act. 5. The Revenue got the same result from the Income Tax Appellate Tribunal. 6. Reading Section 37 of the Act it woul....

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.... seen that the payment of commission had nexus and relation with the sales that are effected and not otherwise. The amount of commission are necessarily co-related to the corresponding amount of sales and although the intention is to enhance and improve the business and consequently sales of the assessee, properly understood the same could not be a sales promotion activity. To appreciate this aspe....