This is a petition under article 226 of the Constitution.
The relief claimed in the petition is that a writ of certiorari may be issued quashing an order dated March 12, 1957, passed under section 18(3B) read with section 18(7) of the Income-tax Act.
The facts lie within a narrow ambit. The petitioner entered into a contract with Messrs. Lababedi Textiles of Manchester for the supply of cloth. The deal was arranged through Messrs. Pioneer Consolidated Company (London) Ltd. The contract form is annexure 'A-1' to the affidavit filed in support of the petition. The buyers name as entered in the contract form is : The Lababedi Textiles Manchester, England, through the Pioneer Consolidated Company (London) Ltd. London. The rate at which cloth was to be supplied is mentioned in this contract form as follows : 19 1/2 pence less 2 1/2 per cent. commission payable to the Pioneer Consolidated Company (London) Ltd. It appears that in respect of the supply of cloth the commission payable to Messrs. Pioneer Consolidated Company amounted to a sum of Rs. 10,777. In the accounts relevant to the assessment year 1952-53 the entries in regard to this transaction which appeared therein were to the effect that the entire amount of sale price worked out at 19 1/2 pence without any deduction whatsoever on account of commission was credited as the sale price in respect of the supply of the entire quantity of cloth. On the debit side the sum of Rs. 10,777 was shown as expense in respect of the sale of cloth. Upon these facts the Income-tax Officer passed the impugned order under section 18(3B) read with section 18(7) on the finding that from these entries it appeared that the amount of Rs. 10,777 though not paid by the petitioner directly to Pioneer Consolidated Company, London was paid indirectly through Messrs. Lababedi Textiles by receiving from that company not the entire amount worked out at 19 1/2 pence but only the amount worked out at 19 1/2 pence less 2 1/2 percent. payable to Pioneer Consolidated Company, London. The Income-tax Officer recorded the further finding in the impugned order to the effect that the liability for payment of commission was of the petitioner. The liability was to be liquidated by payment to the Pioneer Consolidated Company by the petitioner through Messrs. Lababedi Textiles. The petitioner could do this by accepting an amount for purchase price reduced by the amount of commission from Messrs. Lababedi Textiles. Thus according to the view of the Income-tax Officer Messrs. Lababedi Textiles were in a sense the collecting agents on behalf of the Pioneer Consolidated Company Ltd. for collection of the commission due to the Pioneer Consolidated Company, London. I cannot say that this conclusion could not be legitimately drawn from the manner in which entries were made in the account books of the petitioner. The debit of the sum of Rs. 10,777 as expenses of sale would seem to show that the liability was of the petitioner for payment of the commission to Pioneer Consolidated Company in respect of the sale of cloth by it to Messrs. Lababedi Textiles of Manchester.
Two points have been raised before me by learned counsel for the petitioner to challenge the conclusions of the Income-tax Officer in the impugned order. The first point is that the description of the buyer in the contract form as Lababedi Textiles through the Pioneer Consolidated Company showed that the Pioneer Consolidated Company were the buying agent on behalf of the Lababedi Textiles. Accordingly the liability for commission was of Lababedi Textiles and not of the petitioner. To my mind the description of the buyer in the manner indicated above in the contract form is too slender a foundation for this argument. This description does not necessarily lead to the conclusion that the Pioneer Consolidated Company were the agents of Lababedi Textiles for purchase of cloth and as such the liability for payment of commission to Pioneer Consolidated Company was of Lababedi Textiles. The description, to my mind, can also be consistent with the position that the Pioneer Consolidated Company acted on behalf of the petitioner and found for the petitioner a purchaser in Lababedi Textiles being named as a buyer through Pioneer Consolidated Company, but in this situation the liability for payment of commission to the Pioneer consolidated company would necessarily be of the petitioner, In any case this description does not point to only one conclusion as contended for by the learned counsel for the petitioner. If the description is equivocal and the Income-tax Officer drew one inference from that description, I cannot, in the exercise of my writ jurisdiction, rule that the inference drawn by the Income-tax Officer is necessarily erroneous.
The other point urged by learned counsel for the petitioner is that if the liability for payment of the commission was of the petitioner, it would not have been necessary to mention in the rate specified in the contract form the rate at 19 1/2 pence per yard less 2 1/2 percent. commission. It would have been sufficient to mention the rate minus the commission after working out the same without specifying the commission itself as that would be a matter between the petitioner and the Pioneer Consolidated Company, with which Messrs. Lababedi Textiles would have nothing to do. This again to my mind is not conclusive. The mention of the commission in the contract form cannot necessarily lead to the inference that the liability for the payment of commission the situation is equivocal. Taking the description and the rate as mentioned in the contact form and the entries in the accounts of the petitioner, I cannot say that the Income-tax Officer was necessarily wrong in the inferences which he drew. The findings recorded by the Income-tax Officer ar findings of fact. These findings cannot be challenged in a petition under article 226.
Faced with this situation learned counsel argued that, upon the assumption that the findings recorded by the Income-tax Officer were findings of fact and were binding upon me in a writ proceeding the word 'payment' as mentioned in section 18(3B) means actual payment and not notional payment or payment by book adjustment or payment by set-off. In support of this submission learned counsel invited my attention to a decision of the Hyderabad High Court on a parallel provision of the Income-tax Act of Hyderabad in Commissioner of Income-tax v. Nagaria Oil Mills. In this case the Hyderabad High Court made reference to certain observations of the Supreme Court in the case of Keshav Mills Ltd. It is not necessary for me for the purposes of this case to decide done way or the other whether the word 'payment' is to be understood in that section. The question would then be whether upon the findings recorded by the Income-tax Officer there was actual payment by the petitioner in this case or not. The Income-tax Officer has found that the payment of Rs. 10,777 was made not by the petitioner directly but by the petitioner through Lababedi Textiles to Pioneer Consolidated Company. From the accounts and other evidence of the petitioner and upon the findings of the Income-tax Officer the manner in which this was done was that the petitioner received the price of the cloth supplied by it from Lababedi Textiles less the amount of the commission payable by the petitioner to Pioneer Consolidated Company. It follows that Lababedi Textiles constituted themselves an agent of Pioneer Consolidated Company for collecting its commission from the petitioner. The petitioner collected from Lababedi Company the purchase price minus the amount of the commission. In other words the amount of commission due to Pioneer Consolidated Company was left in the hands of Lababedi Textiles when the petitioner collected from Lababedi Company only the price of the cloth supplied minus the commission. Leaving of the amount of commission in the hands of the Lababedi company, to my mind, clearly amounted to payment of commission to Lababedi company as agent of Pioneer Consolidated Company. From this it follows that the payment was to the Pioneer Consolidated Company through its agent for collection of commission and the position was the same as if the payment had been made directly by the petitioner to the Pioneer Consolidated Company. Upon this view it seems to me that the requirements of section 18(3B) regarding actual payment were complied with.
It follows that there is no force in this petition and it is accordingly dismissed with costs.