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Commissioner of Income Tax Vs. Mills Stores Trading Co. (India) Pvt. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberI.T.A. No. 46 of 1983
Reported in(1984)42CTR(Bom)5
AppellantCommissioner of Income Tax
RespondentMills Stores Trading Co. (India) Pvt. Ltd.
Excerpt:
.....(5) air bom r held per incuriam]. - in the present case, the tribunal has believed the case of the assessee that the payments were made as well as that there was nexus between the said payment and the business of the assessee and we do not see how these findings of fact can be interfered within a reference......purposes of the assessment. the said sum was claimed by the assessee as a deduction on account of secret commission paid by the assessee to employees of various mills for purchasing the goods of the assessee.2. the facts giving rise to this application are that the assessee carries on the business of supplying mills stores to various mills. the assessee claimed an amount of rs. 26,112 by way of secret commission paid to the employees of various mills who had purchased goods from the assessee. the ito disallowed the sum of rs. 26,112 on the ground that the fact of payment and its nexus with the business of the assessee has not been established. an appeal preferred by the assessee was, however, allowed by the cit (appeals). the tribunal upheld this decision. the present application is.....
Judgment:

: Kania, J. - This is an application u/s. 256(2) of the IT Act, 1961, for directing the ITAT to state a case and to refer to this court for determination the four questions set out therein. In our view, it is not necessary those questions turn on the basis of controversy as to whether an amount of Rs. 26,112 should be allowed to be deducted out of the assessees total income for the purposes of the assessment. The said sum was claimed by the assessee as a deduction on account of secret commission paid by the assessee to employees of various Mills for purchasing the goods of the assessee.

2. The facts giving rise to this application are that the assessee carries on the business of supplying mills stores to various Mills. The assessee claimed an amount of Rs. 26,112 by way of secret commission paid to the employees of various mills who had purchased goods from the assessee. The ITO disallowed the sum of Rs. 26,112 on the ground that the fact of payment and its nexus with the business of the assessee has not been established. An appeal preferred by the assessee was, however, allowed by the CIT (Appeals). The Tribunal upheld this decision. The present application is directed against the order of the Tribunal. The crucial question is whether there was any evidence before the Tribunal to prove the fact of payment of this amount as the secret commission and whether it could be said to have been an amount laid out wholly and exclusively for the purposes of the assessees business. These are largely questions of fact. The assessee showed to the Tribunal that the payment of this amount as commission had been approved by the Board of Directors of the assessee which is a Private Limited Company. It was further pointed out by the ld. counsel for the assessee that such payments had been made even in earlier years and had been allowed as deductions without any objection being raised by the department. The commission was paid at a uniform rate at 2 1/2 per cent. We further find that the assessee had filed before the Tribunal a detailed list containing names of the Mills to whose agents and employees such commission had been paid and showing also the value of the goods sold to these Mills. The assessee had also supplied to the Tribunal the particulars of the bills and the amounts of the commission paid, although the names of the persons to whom it was paid were not disclosed. It is easy to understand why such names were not disclosed, because had they been disclosed, such employees would have been dealt with by their employers the Mills concerned. On this material the Tribunal held that although the evidence was not direct, there was evidence to show that there was nexus between these payments and the business of the assessee.

3. In the state of facts set out above, it is not possible to say that the findings of the Tribunal which we have referred to above, have been arrived at without any evidence. As pointed out by a Division Bench of this court in Goodlas Nerolac Paints Pvt. Ltd. v. CIT, Bombay City-II (Bombay) of the said report :

'It was for the Tribunal to decide, as the final judge of facts, as to whether the case of the assessee that these amounts were actually paid by way of secret commissions, should be believed or not, in the absence of the names and addresses of the persons to whom secret commissions were alleged to have been paid.'

In that case, on the facts, the Tribunal had disbelieved the case of the assessee regarding payments of such amounts as secret commission and we declined to interfere with that finding for the reasons stated above. In the present case, the Tribunal has believed the case of the assessee that the payments were made as well as that there was nexus between the said payment and the business of the assessee and we do not see how these findings of fact can be interfered within a reference.

In the result, rule is discharged with costs.


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