BRIJLAL GUPTA J. - This Income-tax reference comes to us on a requisition by this court under section 66(2) of the Income-tax Act. The question which has been referred to us for our opinion is as follows :
'Whether the assessee was entitled to claim a deduction on account of a commission of 0-3-0 in a rupee paid to each of the two employees, Munshi Lal and Kesrimal, out of the profits that were actually distributed or out of the estimated profits ?'
The facts giving rise to this reference are in a narrow compass. The assessee is a manufacturer of block glass. In the assessment year in question it had in its employment two individuals named Munshi Lal and Kesrimal. According to the assessee each one of these two employees was to get 3 annas in the rupee out of the net profits of the assessee as remuneration. The remuneration entered as having been paid to each one of these two employees in the account books of the assessee was a sum of Rs. 1,382, total Rs. 2,765. This was on the basis of a sum of Rs. 7,375 which the assessee worked out on its account books as its net profits in the accounting period relevant to the assessment year in question. In proceedings under the Income-tax Act the book version of the assessee regarding its profits was rejected and by the application of the proviso to section 13 of the Income-tax Act the net profits were computed at the figure of Rs. 85,286. Upon computation of net profits having thus been made the assessee claimed that it was entitled to an allowance of remuneration payable to Munshi Lal and Kesrimal at 3 annas per rupee for each one of the two employees on the figure of Rs. 85,286 and not on the figure of Rs. 7,375. The authorities below including the Income-tax Appellate Tribunal came to the conclusion that allowance could not be permitted to be made on the basis claimed by the assessee for the reason that upon the evidence produced by the assessee in the case it could not be held that remuneration to the employees was to be paid not on the actual net profits as worked out by the assessee itself but on the estimate of profits made by the income-tax authorities. Whether commission was to be worked out on the actual profits or on the estimated profits was purely a question of fact. The burden of proving that fact was upon the assessee and it has not been denied that that was not so. The assessee does not seem to have produced any evidence to prove that remuneration of the two employees was to be a percentage of the estimated profits and not of the actual profits. From this it is clear that the answer to the question which has been referred to us must be that the assessee was entitled to claim deduction on account of a commission of 3 annas in a rupee paid to each of the two employees Munshi Lal and Kesrimal, out of the profits that was actually distributed and not out of the estimated profits, and we answer it accordingly.
The income-tax department shall be entitled to the costs of this reference which we assess at Rs. 200.
Question answered accordingly.