TaxTMI 
TaxTMI 
1985 (5) TMI 36
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.... and 1973-74, allowed one of its employees, Gopal Dass, a commission at the rate of 5% on the sale of automobile accessories and parts in addition to his salary. The assessee claimed the amount of commission paid to Gopal Dass during the aforesaid assessment years as business expenditure deductible from its total income. According to the assessee, the amount of commission paid by the assessee-firm to the said employee represented the amount paid to him for the services rendered by the employee and was allowable deduction within the meaning of section 36(1)(ii) of the Income-tax Act, 1961 (" the Act " herein). In the alternative, it was claimed by the assessee that the commission paid to Gopal Dass was expenditure wholly and exclusively incu....
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....clusively for the purpose of the business of the assessee-firm. The learned members of the Tribunal held that the facts of the case were on all fours with those in Shazada Nand & Sons v. CIT [1973] 90 ITR 91 and held as under (at p. 93): " This section no doubt says that the amount of bonus or commission paid should be reasonable with reference to the pay of the employee, the profits of the business and the general practice in similar business or profession. But when this section says that any sum paid to an employee as bonus or commission for services rendered is to be allowed, it means that before the claim is allowed, there should be proof to show that some services were rendered for which the payment is made." After the decision o....
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....m in the earlier years, but that is immaterial. There is no such requirement and the argument based on it cannot be sustained. It is not justified by the language of section 36, sub-section (1), clause (ii), and, indeed, if it were pushed to its logical extreme, it would be difficult to support even payment of bonus as a permissible deduction under that provision. Of course, the circumstances that no additional services are rendered by an employee would undoubtedly be of some relevance in determining the reasonableness of the amount of commission but it would have to be considered along with other circumstances and the question whether commercial expediency justified the payment of commission would have to be judged in the light of all the ....
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....ee under section 37 of the Act still stood valid because of the finding arrived at by the Tribunal that the payment of commission was not wholly and exclusively made for the purpose of the business of the assessee. The assessee, therefore, submitted three identical applications before the Tribunal under section 256(1) of the Act seeking reference to this court in respect of common questions of law arising out of the Tribunal's order on the rectification application. The Tribunal rejected the reference applications on the ground that neither of the questions sought to be referred by the assessee arose out of the Tribunal's order nor were they fit to be referred to the High Court, because the Tribunal had held that the amount of commission....
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....s v. CIT [1977] 108 ITR 358, the amount paid by the assessee-firm to its employee, Gopal Dass, was deductible as business expenditure under section 36(1)(ii) as the same was paid to the employee by way of commission for the services rendered and that no extra service was required to be rendered by the employee, Gopal Dass, so as to entitle him for payment of such commission. Learned counsel appearing for the Department tried to support the order passed by the Tribunal rejecting the applications under section 256(1) of the Act and it was submitted that so far as the disallowance of the amount of commission under section 36(1)(ii) of the Act was concerned, it was based on a finding of fact recorded by the Tribunal that the amount paid to t....
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....the subject was settled by the decision of the Supreme Court, there was clearly an error of law apparent on the face of the record in the assessment order, even though the decision of the Supreme Court came to be pronounced later. It may be observed that the assessee claimed deduction under section 37 in respect of the amount paid by him to the employee by way of commission, only in the alternative, if the claim for deduction of the said amount under section 36(1)(ii) was not allowable under the law and the rejection of the claim of the assessee under section 37 could not entail rejection of the rectification applications in so far as the claim for deduction was allowable under section 36(1)(ii) of the Act. In this view of the matter,....