TaxTMI 
TaxTMI 
TaxTMI 
1985 (6) TMI 57
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....ment proceedings, the ITO observed that the commission paid in a sum of Rs. 53,075 was for procuring orders for the supply of engines and other material. On that basis, the ITO came to a conclusion that the commission was paid in order to procure orders which have promoted the sales of the assessee-firm. He, therefore, treated the commission as part of sale promotion expenses. He, therefore, treated the entire amount of commission as sale promotion expenses and dealt with it under the provisions of section 37(3A). 3. When the issue came before the Commissioner (Appeals), he admitted the contention of the assessee that commission was not only paid for procuring orders but also for after sales service. 4. The learned senior departmental rep....
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....vertisement and publicity in the garb of sale promotion. In the instant case, it was not sale promotion at all. He even drew our attention to an extract from the Finance Minister's Budget Speech for 1978-79. 5. After taking into consideration the rival submissions we are unable to interfere in the finding of the Commissioner (Appeals). Provisions of section 37(3A) were introduced for the first time in the Finance Act, 1978, and were applicable for the assessment years 1979-80 and 1980-81. Sub-section (3A) in its amended form is as under : "Notwithstanding anything contained in sub-section (1) but without prejudice to the provisions of sub-section (3), where the aggregate expenditure incurred by an assessee on advertisement, publicity and ....
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....bsp; business or profession (iii) where such aggregate expenditure exceeds 1/2 per 15 per cent of cent of the turnover or, as the case may be, gross the adjusted receipts of the business or profession expenditure. Dictionar....
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....that the words 'sales promotion' were never intended to cover an expenditure of the nature of commission, as has been paid by the assessee. 6. The word 'commission' has also been defined by their Lordships of the Bombay High Court in the case of Harihar Cotton Pressing Factory v. CIT [1960] 39 ITR 594, as under: "...'Commission' has no technical meaning but both in legal and commercial acceptation of the term, it has definite signification and is understood as an allowance for service or labour in discharging certain duties such for instance of an agent, factor, broker or any other person who manages the affairs or undertakes to do some work or render some service to another..." Commission has a direct nexus with the quantum of sales and....
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....hings or persons publicly known. So, it is in this context that the words 'sale promotion' have also to be read, so that they take their colour from the specific words preceding them. Commission cannot by any stretch of imagination be considered as 'sale promotion'. The provision was specifically meant to disallow extravagant and socially wasteful expenditure and commission can never be said to be an extravagant and socially wasteful expenditure. Regarding services to be rendered by the agents, the Commissioner (Appeals) has dealt with this issue thoroughly. The commission was paid on the basis of an oral contractual agreement and there was no agreement in writing with the agents. However, the correspondence entered into with the agents pro....