Dipak Kumar Sen, J.
1. The facts found and/or admitted in this reference may shortly be stated as follows :
2. Messrs. Vishnu Agencies (P.) Ltd. is the assessee and the assessment year involved is 1966-67, the relevant accounting year being the one ended on the 31st January, 1966. The only question in this reference is whether the assessee was entitled to claim a deduction of an amount of Rs. 76,127 paid by it to M/s. Mangilal Sethia, the sole selling agent appointed by the assessee under an agreement dated the 2nd February, 1959. The agreement was entered into by and between the assessee and the said sole sellingagent in respect of spun R.C.C. pipes and collars manufactured by the assessee and provided, inter alia, as follows:
(a) The agency would be effective on and from the 1st February, 1959.
(b) The sole selling agent would deposit a sum of Rs. 10,000 to be held by the assessee without interest during the subsistence of the agreement.
(c) The sole selling agent would not during his appointment purchase or receive for sale any commodity similar to those manufactured by the assessee from any third party in his own name or account or in the name or on account of any other person or persons.
(d) During the subsistence of the agreement the assessee would not appoint any other sole selling agent to sell any of its produce but this would be without prejudice to the rights of the assessee to appoint agents, distributors or sub-distributors.
(e) On all sales of the products of the assessee, through any agent or distributor or sub-distributor or direct to dealers or consumers, the sole selling agent would be paid a commission of 4% on the listed price.
(f) The agreement would in the first instance be for a period of three years from the 1st February, 1959, to the 31st January, 1962, unless deter-mined earlier otherwise.
(g) The sole selling agent would bear all expenses of establishment, publicity, godown rent, etc., that might have to be incurred in connection with the promotion and sale of the goods of the assessee.
3. At the assessment the ITO following the assessments in earlier years disallowed the assessee's claim for deduction. On appeal preferred by the assessee, the AAC upheld the order of the ITO on the ground that the appellant could not place on record any evidence to prove that the said agents rendered any service to the assessee. All the effective customers of the company were Government departments which placed orders on the basis of tenders. At any rate the appellant did not produce any evidence to show that the services of the said agents were necessary for entering into contracts with such Government departments or that sales could be effected only with the help of the agents. The assessee did not produce any evidence to establish that the Government departments accepted the contracts only at the initiative or with the help of the selling agents.
4. On further appeal by the assessee to the Tribunal it was contended that the Tribunal should reconsider the decision in the earlier years by reason of two decisions, Chainrup Sampatram v. CIT : 24ITR481(SC) and Ram Luxman Sugar Mills v. CIT : 63ITR51(All) . It was also contended that in the relevant assessment year there were some distinguishing features which were absent in the earlier years, namely, that in the earlier years the assessee had three agents, while in this assessment year there was only one, namely, M/s. Mangilal Sethia. It was contended further that the sole selling agents had been assessed to tax on the receipt of the commission from the assessee and that the agreement between the assessee and its selling agent was legally a binding contract. The Tribunal held that the distinguishing features were of little consequence. Whether there were three agreements or one agreement was hardly material for the determination of the controversy, the issue being, whether the selling agents had rendered any service to the assessee or were required to render any service. Similarly, the fact that the said agents had filed returns and had been assessed to tax only proved that the assessee had made the payments to them and nothing more. Accordingly, the Tribunal confirmed the orders of the authorities below and dismissed the appeal. The Tribunal also expressed its agreement with the conclusion of the earlier decision of the Tribunal that the sole selling agents were not required to render any service to the assessee nor had rendered any service as a matter of fact.
5. The orders of the Tribunal for the earlier assessment years, namely, 1963-64, 1964-65 and 1965-66 were considered in Income-tax Reference No. 5 of 1977 [Vishnu Agencies (P.) Ltd. v. CIT (No. 1)] which was disposed of by this Bench on the 28th August, 1978 [Since reported in : 117ITR754(Cal) . This court held in respect of the commission paid to Messrs. Mangilal Sethia, the same sole selling agent, inter alia, as follows (p. 765):
'.....so far as Mangilal Sethia is concerned the assessee could notestablish that he rendered any service to the assessee as a sole selling agent. It is not in evidence that Mangilal deposited the stipulated sum of Rs. 10,000 to the assessee in terms of the agreement or that he secured any order for the assessee for sale of the stipulated products. It was not established that he incurred any expenses on behalf of the assessee on account of establishment or publicity or godown rent or similar items in connection with his agency. Before the ITO, Mangilal stated that the business had been looked after by his brother, Bhikamchand, and that he himself could not state anything as to the services rendered in connection with the agency. The ITO, the AAC and the Tribunal all have come to the conclusion that no services had been shown to have been rendered by the sole selling agent. It does not appear to us that any relevant evidence in this connection was omitted to be considered by the Tribunal or that irrelevant material was taken into account in coming to the aforesaid findings. In our view the assessse has not been able to establish that the commission paid to the sole selling agent was wholly or exclusively for the purposes of its business.'
6. On the application of the assessee under Section 256(1) of the I.T. Act, 1961, the Tribunal has drawn up a statement of case and has referred the following questions of law for the opinion of this court:
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 76,127 paid to Sri Mangilal Sethia as sole selling agency commission on sale of R.C.C. spun pipes and collars was not deductible as business expenditure under Section 37(1) of the Income-tax Act, 1961
2. Whether, in the facts and circumstances of the case, the Tribunal's conclusion that the said expenditure was not incurred wholly and exclusively for the purpose of the assessee's business is vitiated by reason of misdirection, omission to consider relevant evidence or reliance on irrelevant material
7. Mr. Kalyan Ray, learned counsel for the assessee, has contended before us that the authorities below have mechanically followed their decision in the earlier years. In such earlier years there was no doubt that Mangilal Sethia himself was summoned to depose under Section 131 of the I.T. Act, 1961, and his statements before the authorities were not satisfactory; but H could not be said that such statements governed the position for this year and, therefore, it was for the authorities to enquire further into the matter and ascertain whether any service was rendered by this sole selling agent in this particular year. All the authorities including the Tribunal erred in following their earlier decisions.
8. Mr. Ray contended further that, under the agreement, the sole selling agent had undertaken not to purchase or receive for sale any goods, wares or merchandise similar to those manufactured by the assessee and that it further agreed to deposit a sum of Rs. 10,000 was enough to establish that some services were rendered by the sole selling agent.
9. We are unable to accept the contentions of Mr. Ray. It was at no time the contention of the assessee that the sole selling agent had in fact deposited the said sum of Rs. 10,000 and had further undergone any disability or restriction by not purchasing or receiving for sale similar goods as those manufactured by the assessee. The assessee rested its case solely on the payment made by it to the sole selling agent and the fact that the sole selling agent had been paid commission through these years. The onus was on the assessee to establish that there were facts in existence which entitled it to a deduction and it was for the assessee to adduce evidence to show what services, if any, were rendered by the sole selling agent. It cannot be said that the Tribunal has misdirected itself or omitted to consider any evidence or has relied on any irrelevant material in arriving at its conclusion.
10. For the reasons given above we answer the question No. 1 in the affirmative and question No. 2 in the negative, both in favour of the revenue. There will be no order as to costs.
Bimal Chandra Basak , J.
11. I agree.