1984 (2) TMI 107

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....mmission. It was mentioned to the ITO buy the assessee that the said payment was made to M/s Gujart Medical & chemical Stores. On further scrutiny the ITO found that two partners of the said firm were the directors of the company. It was claimed that the said payment of commission was made as per agreement with the said party and that the appointment of sole selling agency was approved by the resolution dt. 30th April, 1976 made by the company. It was thus submitted that as the payment was supported by the agreement which in turn was supported by the resolution of the company the claim as made by the assessee should be allowed. The ITO however rejected the claim of the assesses for deduction on two grounds: In the first place he held that t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....onsidered with reference to the provisions of the IT Act as held in the said cases. Secondly the payment was made under a genuine agreement, the bona fides of which have not been doubted. Therefore, there was an effective contract between the assessee and the said firm to make the payment of commission for the service rendered by them. According to the agreement Shri Patel submitted that the said firm was require to attend to the sale of company's products and they were entitled to commission at the rate of 2 1/2 subject to maximum of Rs. 20,000. Secondly advertisement, travelling and other allied expenses had to be incurred by the sold selling agents. It was the liability of the agents to undertake the payment of goods sold and finally the....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....8 of the Companies Act, the company will be entitled to the deduction under s. 1 (2) (xv) as, in considering the allowability of an expenditure under s. 10 (2) (xv) of the IT. Act, one cannot travel beyond the provisions of the IT. Act and deny the benefit of deduction under that section on the ground that the payment is unauthorised or has been prohibited by some other statue. Further, s. 348 of the Companies Act, 1956, does not impose an absolute prohibition because any excess payment could be authorised under s. 352 of the Act. Therefore any payment in excess of that prescribed in s. 348 cannot be held to be illegal so as to exclude it from the purview of s. 10 (2) (xv)." This decision was followed in subsequent decision in case of CI....