JAGADISAN J. - Messrs. Narasu Pictures Circuit Private Ltd., Madras, the assessees in this tax reference case, is a private limited company. For the assessment year 1952-53, corresponding to the accounting year ending on 30th June, 1951, it filed a return dated 28th December, 1952, showing an income of Rs. 11,406 from business. In arriving at this income the assessee took into account a sum of Rs. 22,767 alleged to be 'booking commission' due from another concern, Presidency Talkies Ltd. The assessees case at that stage was that this amount was due to it on account of service rendered to Presidency Talkies Ltd. for booking pictures for the company. It appears that in the books of account of the Presidency Talkies Ltd. this amount was shown as having been paid to the assessee. In the assessment proceedings of Presidency Talkies Ltd., it claimed this amount as an allowance of expenditure said to have been incurred wholly and exclusively for the purpose of its business. Ultimately, the Presidency Talkies Ltd. did not succeed in this claim. On 17th November, 1954, the assessee filed a revised return claiming a loss of Rs. 11,361 on the footing that the sum of Rs. 22,767 which was originally shown as income receipt was not income as the amount was not received at all. The Income-tax Officer rejected the assessees claim to exclude this amount from the taxable income. The income was computed on the basis of the first return submitted by the assessee. The assessee preferred an appeal before the Appellate Assistant Commissioner and claimed the exclusion of this amount from the computation of its income and further submitted that even if it was treated as income, it was exempt under section 3 of the Finance Department Notification No. 878 (F) (IT) dated 21st March, 1922. The appellate authority negatived both the contentions and affirmed the decision of the Income-tax Officer. The assessee preferred a further appeal before the Appellate Tribunal but did not succeed. The assessee applied to the Tribunal for reference under section 66(1) of the Act and the Tribunal has referred the following questions :
'1. Whether, on the facts and in the circumstances of the case, the inclusion of Rs. 22,767 in the assessees total income is lawful
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the provisions of section 3 of the Finance Department Notification No. 878 (F)(IT) dated 21st March, 1922, are not applicable to the commission of Rs. 22,767 ?'
The payment of booking commission by the Presidency Talkies Ltd., Madras, to the assessee and the question whether such payment can be claimed to be a proper allowance in computing the income of the Presidency Talkies, Ltd., came to be considered by the Appellate Tribunal in the assessment proceedings relating to it. In its order dated 9th February, 1954, the Tribunal observed as follows :
'There is no evidence that the Circuit (the present assessee) was by any means instrumental in obtaining pictures for exhibition at the assessees cinema during the year under review..... By a resolution of the directors dated 16th July, 1952, the amount of Rs. 35,242 was authorised to be paid to the Circuit and the booking commission in respect of the year ended 31st March, 1952, presently under consideration... The accounts of the Circuit are closed annually in June and for the two years ended 30th June, 1951, and 30th June, 1952, with the booking commission alleged to have been received by it excluded, the result is a heavy loss. On the date on which the directors passed the resolution, that is 16th July, 1952, the financial position of both the Circuit and of the assessee should have been available to them. It is, therefore, as clear as a pike staff that the booking commission adjustment has been thought of as a handy expedient to buy over the losses of the Circuit and that the quantum is annually determined on the basis of such losses.' There is enough indication in this observation of the Tribunal that it was not inclined to accept as genuine the so-called payment of booking commission by the Presidency Talkies to the Circuit, namely, the assesses. The disallowance of the claim made by the Presidency Talkies was not on the ground that the amount though paid was not within section 10(2)(xv) of the Act. The payment was not accepted as true as there was nothing to support it except the book entries.
In the present order of the Tribunal which has given rise to this reference it observes as follows :
'The contention before us is that the payment of commission not having been considered as genuine in the hands of the Presidency Talkies Ltd., there cannot be receipt also. We cannot accept this view. Reference to genuine payment does not mean absence of any payment or adjustment. The genuineness was with respect to service rendered and the necessity for such payment. The bogey of double taxation also does not exist, because in this case, the parties are entirely different.'
It is very difficult to follow the reasoning of the Tribunal contained in the above passage. The assessees contention was that the amount could not be included in the taxable income as the genuineness of the payment of any booking commission by the Presidency Talkies was not accepted in the assessment proceeding of the latter. It may be that the observation of the assessing authorities or the tribunal in these proceeding should not be taken in favour of the assessee conclusively. The question whether the assessee received the disputed amount as income is a question of fact which it was the Tribunals duty to decide. It should have recorded a categoric and unequivocal finding in the matter.
Learned counsel for the assessee has placed before us the order of the Tribunal relating to the assessee in respect of the assessment years 1953-54 and 1954-55 The adjustment of booking commission came in for consideration for these years also. Referring to the Tribunals order relating to Presidency Talkies Ltd., the following observation is made :
'The finding of the Tribunal is clear. The commission is only an adjustment. There has been no actual payment or a receipt of cash involved. Such an adjustment has been held to be bogus so that in effect it has got to be erased out of the picture.'
Elucidating the passage in the Tribunals order relating to the assessee extracted above the Tribunal made the following observation :
'In the above decision it has to be respectfully pointed out that the Tribunal has failed to consider that the claim was based on mere book entries involving no cash transactions and further that the services rendered and necessity for the adjustment had to be considered by the entire Tribunal only as an alternative (assuming the adjustment to be genuine for purposes of section 1O(2)(XV)).'
The Tribunal has not been consistent in its views on the question whether there was an agreement between the assessee and the Presidency Talkies Ltd. for payment of booking commission and whether in fact and in truth any such commission was paid in any year. It seems to us that the Tribunal failed to bestow proper attention on the facts of the case and omitted to record a clear finding on the primary question of the truth or otherwise of the receipt of the sum of Rs. 22,767 by the assessee.
Learned counsel for the department contends that it was never the case of the assessee that no booking commission was due to it from the Presidency Talkies. Reliance is placed upon the resolution of the board of directors of the assessee company dated the 17th July, 1954, which runs as follows :
'Resolved that in view of the fact that the Presidency Talkies Ltd. has been put to unavoidable expenditure of payment of tax on booking commission claimed by the company and in consideration of the mutual good business relationship that exists between the companies the booking commission charged for the above accounting years be waived and that the Presidency Talkies Ltd. be accordingly advised about the waiver of the booking commission and the necessary refund would be granted.'
Emphasis is laid on the terms of this resolution which purported to waive the booking commission and it is contended that unless the assessee had a right to claim the commission from the Presidency Talkies there was no necessity for a waiver. The words embodying the resolution should not be stressed and construed adopting the standard of interpretation of statutes. The assessee company and the Presidency Talkies Ltd. are sister concerns having the same shareholders. This is admitted by the assessee. In the eye of law, however, they are two independent corporations. If no booking commission was charged or chargeable by the assessee against the Presidency Talkies Ltd., any entry in the books of account of the assessee making it appear as if the Presidency Talkies Ltd. was indebted to it, cannot lead to the inference either that the assessee received the amount or that a right to receive it accrues in its favour. It is true that in the original return filed by the assessee this amount was voluntarily included as part of the taxable income. But this position was retracted from in the revised return submitted by it. The amount can be brought to tax only if it is determined by the department to be income in the hands of the assessee. There must of course be materials to sustain the view that it is income. Any omission on the part of the department or the Tribunal to record a clear finding on this question, namely, whether it is income or not, must result in its exclusion from chargeability to tax.
We are clearly of opinion that there are no materials on record to justify the inclusion of the sum of Rs. 22,767 in the assessees total income. Question No. 1 is therefore answered in favour of the assessee. In view of our answering the first question as indicated above, there is no necessity to answer the question No. 2 as it does not arise. The assessee having succeeded in full it will be entitled to its costs from the department. Counsels fee Rs. 250.