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TMI Blog2014 (1) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... he following substantial questions of law:- "1. Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in dismissing the appeal of the revenue whereby upholding the action of learned CIT(A) directing deletion the disallowance of expenditure of Rs.10,36,879/- and Rs.4,29,485/- incurred by the assessee as secret commission and specimen distribution respectively? 2. Whether on the facts and in the circumstances of the case, the incurring of expenses like secret commission and specimen distribution to public servants was not an offence or was not prohibited by law e.g. Under the Prevension of Corruption Act, 1988 and/or the Indian Penal Code, 1860/ the Code of Criminal Procedure, 1973 whereby attracting it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal filed by the assessee, vide order dated 21.10.1992, Commissioner of Income Tax (Appeals), Jalandhar, following the order in the case of the same assessee of Income Tax Appellate Tribunal, Amritsar of 14.10.1992 in ITA No.568 to 570(ASR) 1991 and 571 to 574(ASR)/1991 for the assessment years 1982-83 to 1984-88 and 1985-86 to 1988-89 respectively, deleted addition made by the Assessing Officer and thus relief of Rs.10,36,879/- was granted to the assessee. This order Annexure A-2 dated 21.10.1992 was unsuccessfully challenged by the revenue before the Income Tax Appellate Tribunal which announced its order on 11.2.1999 (Annexure A3). Claim of the revenue is that the expenditure made on payment of secret commissions in the name of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn furnished depicting such expenditure has always been accepted by the authorities. We have heard counsel for the parties while perusing the paper book. When rival claims of the parties are evaluated in the interface of facts and attending circumstances, it transpires that the revenue had all along been accepting return with expenditure "commission account" as also "specimen account" without a question mark. In CIT v. M/s Dhanpat Rai & Sons, (1996)222 ITR 0668, 12 income tax cases of this very assessee, wherein all along expenditure on commission account as also on specimen account was shown to have been made by the assessee, were decided. Primarily endorsing findings of the Tribunal based on consideration of the evidence and material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure." The impugned order of the Tribunal is of 11.2.1999 (Annexure A-3). This amendment had come in force in the year 1998. It is, thus, clear that this amendment had been introduced earlier to the date of passing of the impugned order by the Tribunal. Despite the fact that this amendment had already seen the light of the day earlier to the passing of the impugned order and its operation was also made retrospective with effect from 1.4.1962, this major change in law did not engage the attention it deserved from the Tribunal. Looking from another angle, unduly swayed by the conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable, are also prominently missing from the impugned order of the Tribunal. In short, the impugned order neither discusses the evidence nor takes into account any other facts and attending circumstances but there is only sweeping reference to its earlier judgments as also decision of this Court in CIT v. Dhanpat Rai & Sons (ibid) whereby appeal of the revenue was dismissed. When neither the incurring of expenditure as a fact under the two given heads has been properly accounted for nor application, in their relation and impact of Explanation added to Section 37 of the Act has been taken into consideration, the impugned order is legally vitiated. At this stage, reference may also be made to CIT v. Taraporvala Sons Co. (P) Ltd., repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appended thereto. However, having regard to the fact that the Tribunal could not have examined at the time it passed the order the controversy in the light of the Explanation which was inserted in the year 1998 with retrospective effect from 1st April, 1962, we remit the matter to the Tribunal to re-examine afresh in the light thereof." As a sequel to the discussion already made, the impugned order is set aside; the case is remitted to the Tribunal for deciding the question of allowability of deduction on secret commissions as also expenditure allegedly made on distribution of free books in the light of Explanation introduced and appended to Section 37(1) of the Act while evaluating and probing evidence of incurring of expenses on both t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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