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Issues:
Claim for deduction of expenditure incurred for earning profits. Validity of the alleged agreement of agency. Applicability of the payment made to a partner of the firm. Relevance of the findings of the Tribunal in the assessment proceedings. Analysis: The judgment pertains to an application under section 256(2) of the Income Tax Act, 1961, where the applicant-assessee, a registered firm, claimed a deduction of Rs. 15,598 as an expenditure for earning profits for the assessment year 1971-72. The claimed amount was purportedly paid to Anil Bhasin, son of one of the partners of the firm, as commission under an alleged agreement of agency. However, the Income Tax Officer (ITO) rejected the claim, deeming the agreement of agency as a sham transaction and concluding that the payment was made to the partner, Madan Mohan, without any valid consideration. The Appellate Authority and the Tribunal upheld the ITO's findings, leading to the assessee's application for reference being rejected, subsequently leading to the present application before the High Court. The High Court, after hearing the arguments, dismissed the application, rejecting the contentions raised by the applicant's counsel. The Court noted that the Tribunal's finding on the alleged agency agreement and the payment to Anil Bhasin was based on the material on record. The Tribunal considered Anil Bhasin's lack of business experience, his status as a college student during the relevant period, and the absence of evidence supporting the claim that he rendered services to the firm as per the agency agreement. Consequently, the Court found no legal question arising from the Tribunal's decision in favor of the assessee. Regarding the issue of whether the payment was actually made to Madan Mohan instead of Anil Bhasin, the Court held that this question could be raised by Madan Mohan in his assessment proceedings. The Court affirmed the Tribunal's decision not to delve into this matter, as it was deemed appropriate for consideration in a separate context. Consequently, the Court concluded that no legal question arose from the Tribunal's decision on this aspect as well. In conclusion, the High Court dismissed the application, emphasizing that the Tribunal's findings were based on the evidence on record, and no legal issues were found to warrant a reference. The Court ruled in favor of the revenue authorities, upholding their decision to disallow the claimed deduction and affirming the validity of their findings regarding the alleged agreement of agency and the payment made to Anil Bhasin.
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