TMI Blog2015 (3) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... ith 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission agents for procurement of order for supply of liquor. Following the aforesaid judgment of the Kerala High Court, the Karnataka High Court had decided a similar question arising in Income Tax Appeal No. 12 of 1999 and Income Tax Appeal Nos. 42, 44, 46 and 47 of 2001, in a like manner i.e. against the assessee and in favour of the revenue. Aggrieved by the aforesaid orders of the High Court of Karnataka which pertains to different assessment years, Civil Appeal No. 3214 of 2011 and Special Leave Petition (C) No. 10080 of 2014 have been filed by the assessee. In view of the fact that the decision of the Karnataka High Court in I.T.A. No. 12 of 1999 had followed the decision of the Kerala High Court impugned in Civil Appeal No. 1569 of 2007 and the decision of the Karnataka High Court in the subsequent appeals before it (impugned in Civil Appeal No. 3214 of 2011 and Special Leave Petition (C) No. 10080 of 2014) essentially follows the decision rendered in I.T.A. No. 12 of 1999, it will be necessary first to deal with the issues arising in Civil Appeal No. 1569 of 2007 and depending on the decision therein the remaining appeals will have to be accordingly answered. 2. Suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one item of claim for deduction pertained to the corporate management charges paid by the assessee to U.B. Limited and an issue pertaining to the said claim was one of the twelve questions initially framed in the Reference, in the questions reframed by the High Court, the said question does not find any mention. Be that as it may, the High Court on the reasons recorded in its order dated 31.03.2005 thought it proper to reverse the findings and conclusions recorded by the learned Tribunal. Eventually, in the ultimate paragraph of its order the High Court after recording the conclusion that the Tribunal has committed a grave error in not properly understanding the transaction entered into between the assessee and others set aside the order of the Tribunal and upheld the order of the Commissioner (Appeals) and answered the questions in favour of the revenue by holding that the assessee had not discharged the burden so as to entitle it to deduction under Section 37 of the Act. Aggrieved, this appeal has been filed by the assessee. 6. Three propositions have been advanced before us on behalf of the contesting parties. The first is whether the High Court could have reframed the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following terms. 16. In the present case, the question of law referred to the High Court for its opinion was, as to whether the Tribunal was right in upholding the findings of the CIT (Appeals) in canceling the penalty levied under Section 271(1)(c). Question as to perversity of the findings recorded by the Tribunal on facts was neither raised nor referred to the High Court for its opinion. The Tribunal is the final court of fact. The decision of the Tribunal on the facts can be gone into by the High Court in the reference jurisdiction only if a question has been referred to it which says that the finding arrived at by the Tribunal on the facts is perverse, in the sense that no reasonable person could have taken such a view. In reference jurisdiction, the High Court can answer the question of law referred to it and it is only when a finding of fact recorded by the Tribunal is challenged on the ground of perversity, in the sense set out above, that a question of law can be said to arise. Since the frame of the question was not as to whether the findings recorded by the Tribunal on facts were perverse, the High Court was precluded from entering into any discussion regarding the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that: the engagement of Golden Enterprises for carrying out certain support services was in the business interest and is not the above finding also based on surmised and conjectures like that two sales officers of UB Group stationed at Madras did not do or at any rate could not have done any sub line service at the unit level wrong, unreasonable and unsupported by materials? 8) Whether, on the facts and in the circumstances of the case is the increase in sales noted in paragraph 10 (page 18) of the order of the Tribunal based on the increase in the quantum or increases in price and if the increase in sales is based on an increase in price is not the same an irrelevant consideration and the order vitiated? 9) Whether, on the facts and in the circumstances of the case, should not the Tribunal have considered the contention of the Revenue that ultimately Golden Enterprises has in turn appointed one Abhinava Agencies for doing such work and therefore Golden Enterprises did not have the necessary infrastructure to do the services in its correct prospective witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 1967 (63) ITR 57 and Lachminarayan Madan Lal vs. Commissioner of Income Tax West Bengal 1972 (86) ITR 439. In fact the High Court noted the following observations of this Court in Lachminarayan (supra): The 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. 12. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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