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Issues Involved:
1. Whether the commission paid to the selling agents, Metalware & Co., in excess of 5% of the turnover was an expenditure u/s 10(2)(xv) of the Income-tax Act, 1961. Summary: Issue 1: Justification of Commission Paid in Excess of 5% The Tribunal was tasked with determining if the commission paid to Metalware & Co. exceeding 5% of the turnover was an allowable expenditure u/s 10(2)(xv). The assessee firm, Indo-Metal Industries, initially had a marketing arrangement with V. C. Ramalingam & Sons, which was terminated in December 1953. Subsequently, Metalware & Co., a firm consisting of the wives of the working partner and his brothers, was appointed as the selling agent with a commission of 5% of the turnover. This commission was later increased to 10% from April 1, 1959. The Income-tax Officer disallowed the increased commission, deeming it fictitious and not wholly and exclusively for business purposes. The Appellate Assistant Commissioner, however, found the agency firm genuine and recognized the services rendered, but disallowed the increased commission as it was not justified by business considerations. The Tribunal upheld the genuineness of the agency firm but disallowed the extra commission, concluding it was not wholly and exclusively for business purposes. The High Court, referencing several Supreme Court cases, emphasized that once the genuineness of the agency and the services rendered are established, the reasonableness of the commission should not be questioned by the tax authorities. The Court found no material evidence to support the Tribunal's disallowance of the increased commission and concluded that the disallowance was not proper. Conclusion: The High Court answered the referred question in the negative, ruling against the revenue, and held that the disallowance of the commission exceeding 5% was not justified. The assessee was awarded costs with counsel's fee set at Rs. 250.
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