TMI Blog2008 (5) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is that the learned CIT(A) erred in deleting the addition of Rs. 46,45,317 out of the commission expenses incurred for ensuring the continuation of lottery trade in the State of Madhya Pradesh. It is further mentioned that the learned CIT(A) erred in deleting the aforesaid addition without appreciating that the ground of the assessee before the Tribunal was that the income was enhanced by the CIT (Appeals) without allowing opportunity to the assessee, which led to restoration of the matter to the file of the CIT(A). It is also mentioned that no evidence was there to show that any effort was made by the agents to persuade the State Government authorities to exercise its discretion in not banning the lottery. It is also mentioned that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer that the practice in the lottery trade was that the agents were responsible for realization of the sale proceeds. Thus, it was held that the payment had no nexus with the promotion of sales in the business of the assessee. It was also explained that the Government of Madhya Pradesh intended to ban lottery business within its territory. The aforesaid agents were entrusted with the work of liaison with the administration and the Government for continuation of the business and to manage the business in the State of Madhya Pradesh. The commission was paid to these parties for managing the business and maintaining liaison with the Government and the administration. In this connection, the Assessing Officer observed that the main c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure was liable to be disallowed and the appeal was decided accordingly. The assessee agitated the matter further before the Tribunal and the appeal was disposed of on 29-11-2004 in ITA No. 5608(Del)/2003. The ground of the assessee was that the learned CIT (Appeals) erred in enhancing the disallowance of commission not only by misinterpreting the provisions contained in section 37(1) but also by not allowing an opportunity to the assessee before making the enhancement in the income. In paragraph 6 of the order, it was held that the matter is required to be restored to the file of the learned CIT (Appeals) to decided afresh in accordance with law after giving adequate opportunity of being heard to the assessee. It was further men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recourse to section 5 or not. In order to secure that such a recourse was not taken up by the State Government, the agents were appointed and the question of the expenditure being against public policy had to be examined in this context. It was his view that mobilizing public opinion or influencing legislative decisions in the context of aforesaid scenario, was not against the public policy. An example was cited that before finalizing of the Union Budget, individual and institutions make representations to the Central Government, which are also considered and there is nothing illegal or unethical about it. The question whether, the sale of lottery tickets is good or bad was not really relevant. The question was whether the State of Madhya P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment was under an agreement for carrying out activities, which were against the public policy. The learned CIT(A) not only deleted the income which was enhanced in the first round but also deleted the disallowance made by the Assessing Officer by holding that there was nothing illegal in the activities of the agents, which were in the nature of making representations before the Legislature and influencing public opinion. Since lobbying and influencing public opinion was against the public policy, the learned CIT(A) ought to have upheld the disallowance of Rs. 46,45,317, made by the Assessing Officer. 4.1 In reply, the learned counsel pointed out that there were contradictions in the order of the Assessing Officer when it was held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the income. The Explanation does not use the words "public policy". The words are "offence" and "prohibited by law". Nothing has been brought on record that the activities of the agents of making representations and mobilizing public opinion for not exercising option under section 5 of the Central Act was an offence or was prohibited by law. The State Governments were carrying on their respective lottery businesses and the purpose of the Central Act was to limit such activities within the territories of the States at the option of the States. Thus, there was nothing illegal about carrying on the lottery business or mobilizing opinion for continuation of sale of lottery tickets of other States within the State of Madhya Pradesh. Not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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