LexLACHMINARAYAN MANDAL LAL versus COMMISSIONER OF INCOME-TAX, WEST BENGAL
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• , • J A B c D LACHMINARAYAN MADAN LAL V; COMMISSIONER OF INCOME-TAX, WEST BENGAL . ! ' . Septenlber 13, 1972 [K .. s. HEGDE, P. JAGANl\IOHAN REDDY AN~ H. R. KHAN:-0.~, JJ.J Income Tax Act, 1961, s. 31-Item. of expenditure laid out or expand- e,/ who//.v and exclusively. for tire purpose of tire business-ccPaymena of. selling agency commirsio~Power oj ·the Income Tax Officer. to decide whether Selling Agency agreement is a genuine business arrangentent- Section 25&--Tribunal not stating a case for the opinion of the High Court and High Court not calling for a state1nent of case-Whether justified. . The assessee is a registered firm of three partners who are l>rothers, ·each having I/3rd share and is engaged in the manufacture and sale of aluminium utensils. In. the assessment year 1963·64, the assessee c)aimed to have paid Rs. 31,684/- to l\I/s. Eastem Sales Corporation a. selling_ agency commission and claimed deduction of· the same under section· 37 of the Act· a. an item of expenditure laid out or expanded. The selling agency firm was principally a partnership firm of -the wives and minor sons of the partners' assessee firm. The selling agency_ agree- ment woo entered into on March 26, 1962, while the partnership of the selling age:ncy firm came into existenc'.e on· April ·.13; 1962. The 1>usm.ss address of the selling agency firm was the same ·as that of the arsessea firm. The selling agency firm had no godown of its own nor any trans• port vehicles. . The Tril>unal held that the selling agency firm had no genuine i;ndependent existence and that the selling agency firm was only · a m.ake·relieve arrangement and a device to minimise the tax liability of E ··the assessee firm. · The .Tril>unal further he'd that the selling agency agree- -ment' was not a genuine business . arrangement, and refused refen:pce to High Court. The High Court declined to call upon the Tribunal to F state a case. as desired . by the assessee firm. . · · . On appeal to this Court on the grounds (i) that the Tribunal mis- construed or misunderstood the selling agency agreement and the part- nership deed and (ii) that the Tribunal ignored the oral evidence and the s-ame had vitiated its conclusions and on the question whether any question· of law arises from the order of the Tril>unal which required the Tribunal. to state the case for the.opinion of the High Court, Dismissing the appeal, Held (i) ·The assessee by adopting a device h.ls made to appe.ir that the income which belonged to it had l>een earned by some other person. [213C] - . G Comnzissionef. of /nconze Tax, Gujarat v. A. Ran1an & Co. 61 J.T.R. II, followed: · ' . (ii) The mere existCiJl<:e·of an agreement l>etween th.; arsessee and its selling agents or payment of certain amounts as commission, does not bind -.,. the lna>me Tax Officer to hold that the payment~ was made exclusively and wholly· for the purpose of· the assessee.'s bu·iness. It is :still open to the Income Tax. Officer to consider the relevant factors and deter- H · mi;ne. for himself whether the Commission said to have been paid to the selling agents is properly deductil>le under s.·37 of the Act. [214Al Sw'1deshi Cotton Mills Co. Ltd. v. Commissio~~ of Inc~me T,,;,, u.P., 63 I.T.R., 57, I 208 SUPREME COURT REPORTS [1973) 2 S.C.R. • -(iii) Held, further, that as the TribUlla! had not relied upon any irrelevant evidence and the inferences were rationally arrived at. [212H] . Dhiraj/a/ Girdharilal v. Commissioner of income TWc, Bom/Ja.v, 26 .. l.T.R. 736, Commissioner of Income Tax, West Beng/4-11 v. Rajastlran Mines Lrd., 78 ·l.T.R. 45 and Commissioner <>f Income Tax, Punjab v. Indian Woo/k/i Textile Mills, 51 I.T.R. 291, held inapplicable. (v) The Tribunal was justifi~d.in not stating a case for the opinion of B the High Court under section 256(1) and the High Court ·was justified in. not calling for statement of case under s. 256(2). [214C] Cominissioner of l~co,;,e Tax, West Hen~] JI. v~ -Durga Prasad Atore, ,. , . ,- 82 I.T.R. 540, referrel to. · · --- " ' ' CIVIL APPELLATE JURISDICTION : Civil' Appeal No. 20 of 1969. C Appeal by.special leave from the order dated July 1, 1968 of the Income Tax Appellate Tribunal ,'A' Bench, Calcutta, in Income Tax Reference No. 26 of.1968. ·' • M. C. Setalvad, D. N. Mukherjee, C. K. Ray and G: S. Chatterjee, for the appellant. - · · D S. C. Manchanda, P. I. Juneja: B; D. Sha
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