ALUMINIUM CORPORATION OF INDIA LTD. versus COMMISSIONER OF INCOMETAX, WEST BENGAL

Citation: [1973] 1 S.C.R. 1097 · Decided: 29-08-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Judgment (excerpt)

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ALUMINIUM CORPORATJON OF INDIA LTD. 
v. 
COMMISSIONER OF INCOME·TAX, WEST BENGAL 
August 29, 1972 
[K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ.] 
Income Tax Act 1922 s. 10(2)(xv) & 66-Exr,endilure laid out wholly 
and excluslVely .for business-Commission payab e to selling agents In a 
case whNe sales are not actually effected through selli11g agents-Construe· 
lion of agreement-Expenditure on such Commission whether allowable 
as a deduction-Question of fact 'decided by Tribrmal--High Courfs power 
to interfere in reference proceedings under s. 66. 
Under clause (6) of the agreement between the assessee company and 
its Selling Agents discount was to be allowed to the Selling Agents not only 
on sales effected through the said Agents or sub-agents but also on sales 
effected directly by the Principal. Under clause (8) the Agents were res-
ponsible for the payment of the priq, due from the purchasers immediately 
after the goods left the Principal's works or godown. Such payment had 
to be made on presentation of necessary papers or documents by the 
assessee, not later than a fortnight after the goods were despatched. In 
default of payment the assessee was entitled to charge interest until reali-
sation at the rate of six per cent per annum on the balance for the time 
being outstanding. Under cl, (9) of the agreement, the Agents were also 
re8ponsinble for due fulfilment of all contracts made by them whether for 
ready or forward sales and also for the consequences of any breach of 
contrac,t by any customer and for all losses and damages arising therefrom 
to the assessee provided there was no default on the part of the assessee 
in manufacturing or giving delivery of any goods required or sold under 
any contract in compliance with the terms of the agreement. 
The commission paid by the assessee to the Selling Agents was allowed 
by the income tax authonties as deductible expenditure for some years. 
In respect of the assessment year 1955-56 however the assessees claim for 
such deduction was disallowed. The Income Tax Officer held that the 
payment bad not been made on business considerations. 
The Appellate 
Assistant Commissioner further held that the. agreement had not been 
acted upon. 
The Tribunal however did not agree with the view that 
the payment had been made for extra-commercial considerations, or that 
the agreement had not been ac\ed upon. The High Court in referenc'io 
held that the expenditure in question was not expended for the purpose 
of the l!S8e.!See's business within the meaning of s. 10(2) (xv) of the 
Income-tax Act, 1922 inasmuch as in the 'accounting year all sales were 
directly effected by the ilssessee and no sale was effected by the Selling 
Agents. In appeal to this Court by certificate, 
HELD : (i) The jurisdiction of the High Court .under s. 66 is only an 
advisory jurisdiction. 
That being so it can only pronounce its opinion 
on the questions referred to it. It cannot sit as an appcflate court over 
the decision of the Tribunal. [1099Cl 
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In the present case the nigh Court overlooked. the effect of els. 6, 8 
'1nd 9 of the agreement. It alco overlooked the significan~ of the fad 
t~at in the earlier years the commhion. paid to the Selling Agents had 
been considered as clecluctiblc expenditure. 
It also did not take notice 
I 09 8 
SUPREME COURT REPORTS 
[ [ 973) l S.C.R. 
of the contention of the assessee that though the sales were directly effect-
ed by the assessee they were all convasse0 by the Selling Agents, 
[I 102E-FJ 
The Tribunal after taking into consideration the various terms of the 
agreement as well as the significance of the deduction given in the earlier 
assessment years came to the conclusion that the Income-tax Officer and 
the Appellate Assistant Commiss:•Jner erred in their opinion that thc-
cxpenditurc was not incurred for any commercial expediency or that the 
agreement was not in force in the relevant accounting year. The Tribunal' 
had given good reasons in support of its conclus:on. The primary fact> 
found by the Tribunal and the faCt'ual inference drawn therefrom was 
not open to review by the High Court. [l !03Fl 
The appeal must accordingly be allowed. 
A 
Sa·tulesl1i Cotton Mills Co. Ltd, v. Co1111nis.rio11er of Jnco111e-tax, U.P... 
C 
6J I.TR. 57, distinguished on facts. 
Commissioner of Income-tax, Bombay v. Walchand & Co, Private Ltd.. 
:< 
65 I.T.R. 381, and J.K. Woollen Manufacturers 
v. 
Commiss

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