Commissioner of Income Tax vs Neimla Textile and Finishing Mills P. Ltd.

S.P. Goyal, J.—The assessee-company during the accounting year; 1961-62 claimed a deduction of Rs. 69,228 stated to have been paid as commission to M/s. Textile Processing Agency, Amritsar, for procuring business for the assessee. This amount was disallowed by the ITO but, on appeal, the AAC modified the order and allowed a deduction of Rs. 33,809, thejamount actually incurred by way of expenses by M/s. Textile Processing Agency, as business expenditure. The order of the appellate authority was confirmed by the Tribunal. Dissatisfied therewith, the revenue got referred the following question for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the amount of Rs. 33,809 claimed by the assessee in the assessment for the year 1961-62 was an admissible deduction u/s 37(1) of the Income Tax Act, 1961 ?"

From the perusal of the statement of facts, it is evident that the amount in dispute was, in fact, incurred as expenses by M/s. Textile Processing Agency. Even though the amount claimed to have been paid by way of commission was disallowed, because the contract of agency had come into being after the accounting year, still it is not disputed that the assessee was bound to reimburse to the said agency for the actual expenditure incurred by the latter. The assessee was, therefore, bound under law to pay the amount in dispute to M/s. Textile Processing Agency and the said amount was, therefore, rightly allowed as business expenditure of the assessee. The question referred to is, accordingly, answered in the affirmative, against the revenue and in favour of the assessee. No costs.