2007 (8) TMI 309

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....s stated to have emerged from order dated 26.11.1997, passed in I.T.A. No. 155(ASR)/1991, in respect of assessment year 1988-89:- "Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal, was right in law in holding that commission paid by the assessee to the agents is an allowable expenditure?" 2. Brief facts may first be noticed. The assessee-respondent filed its return of income for the assessment year 1988-89 claiming allowance on commission paid by it to various agents who are stated to be relatives/friends of the partners of the assessee firm. The amount of commission amounted to Rs.7,30,939/-. The Assessing Officer disallowed the claim with the observation that the payment of commission was....

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....as to remit the sale price as per the bills raised by the IDPL. Therefore, the agents were instrumental in getting all the terms of the contract between IDPL and the assessee firm complied with and they were appointed for commercial expediency. The Tribunal went on to observe as under:- "10. ……To achieve the turnover of Rs. 1,90,37,959/- it has to appoint sales agents to whom it has paid commission on the same patterns as it was receive from IDPL but retaining ½% for itself. The payment to these agents have been made by Account Payee Cheques and the fact it could not be paid during the assessment year under consideration is also explainable because at the close of accounting year, the IDPL was to pay to the assessee a sum of Rs.7,77....

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....ed Section 10(2)(xv) of the Act. Accordingly, it held that the expenditure of payment of commission was for the purpose of the assesee's business. 6. The Tribunal also examined as to whether all the agents were relatives of one partner or the other and concluded that except Mrs. Alka Sharma, who happens to be the wife of Shri Daljeet Sharma, partner, none-else was the relative within the meaning of Section 2(41) of the Act and that the Assessing Officer could have invoked the provisions of Section 40A(2)(b) of the Act. Accordingly, it has disallowed 1/3rd of the commission paid to Mrs. Alka Sharma treating the same as excessive in terms of Section 40A(2)(b) of the Act. 7. After hearing learned counsel for the revenue at a considerable....