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2015 (3) TMI 368 - SC - Income TaxDisallowance of commission purportedly paid to commission agents for procurement of order for supply of liquor - deduction under Section 37 - questions reframed by the High Court have been answered against the appellant-assessee and in favour of the revenue - whether the High Court could have reframed the questions after the conclusion of the arguments and that too without giving an opportunity to the assessee? - Held that:- A reading of the questions initially framed and subsequently reframed show that what was done by the High Court is to retain three out of twelve questions, as initially framed, while discarding the rest. Some of the questions discarded by the High Court were actually more proximate to the question of perversity of the findings of fact recorded by the learned Tribunal, than the questions retained. From a reading of the Order of the High Court it is clear that the High Court examined the entitlement of the appellant assessee to deduction/disallowance by accepting the agreements executed by the assessee with the commission agents; the affidavits filed by C. Janakiraman and Shri A.N. Ramachandra Nayar, husbands of the two lady partners of RJ Associates and also the payments made by the assessee to RJ Associates as well as to Golden Enterprises. The question that was posed by the High Court was whether acceptance of the agreements, affidavits and proof of payment would debar the assessing authority to go into the question whether the expenses claimed would still be allowable under Section 37 of the Act. This is a question which the High Court held was required to be answered in the facts of each case in the light of the decision of this Court in Swadeshi Cotton Mills Co. Ltd. Vs. Commissioner of Income Tax [1966 (9) TMI 30 - SUPREME Court] and Lachminarayan Madan Lal vs. Commissioner of Income Tax West Bengal 1972 [1972 (9) TMI 4 - SUPREME Court] werein held that mere existence of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, does not bind the Income Tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessee's business. Although there might be such an agreement in existence and the payments might have been made. It is still open to the Income tax Officer to consider the relevant facts and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under Section 37 of the Act. The true effect of the Government Circulars along with the agreements between the assessee and the commission agents and the details of payments made by the assessee to the commission agents as well as the affidavits filed by the husbands of the partners of M/s. R.J. Associates were considered by the High Court. The statement of the Managing Director of Tamil Nadu State Marketing Corporation Ltd. (TASMAC Ltd.), to whom summons were issued under Section 131 of the Act, to the effect that M/s. Golden Enterprises had not done any liaisoning work with TASMAC Ltd. was also taken into account. The basis of the doubts regarding the very existence of R.J. Associates, as entertained by the Assessing Officer, was also weighed by the High Court to determine the entitlement of the assessee for deduction under Section 37 of the Act. In performing the said exercise the High Court did not disturb or reverse the primary facts as found by the learned Tribunal. Rather, the exercise performed is one of the correct legal inferences that should be drawn on the facts already recorded by the learned Tribunal. The questions reframed were to the said effect. The legal inference that should be drawn from the primary facts, as consistently held by this Court, is eminently a question of law. - Appeal dismissed.
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