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TMI Blog1972 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee claimed to have paid Rs. 31,684 to Messrs. Eastern Sales Corpn. as selling agency commission and claimed deduction of the same under section 37 of the income-tax Act, 1961 (to be hereinafter referred to as "the Act"), as an item of expenditure laid out or expended wholly and exclusively for the purpose of the business. The Income-tax Officer rejected that claim. But the Appellate Assistant Commissioner in appeal allowed the same. The Appellate Assistant Commissioner after summarising the conclusions reached by the Income-tax Officer and setting out the arguments advanced on either side, concluded by observing : "On a careful consideration of the facts and circumstances, I am inclined to take the view that the discount should be allowed as a deduction, as having been laid out wholly and exclusively for the purpose of the appellant's business. The facts narrated above clearly indicate that there has been a phenomenal increase in the sales of the appellant, after the appointment of the selling agents. The mere fact of the partners of the selling agents being closely related to the partners of the appellant-firm is of little consequence, in the absence of proof of collus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy firm. From these facts, the Tribunal inferred that the selling agency firm is nothing but another manifestation of the assessee-firm. The Tribunal further came to the conclusion that on the day the selling agency agreement was entered into, viz., on March 26, 1962, the selling agency firm had not even come into existence. It came into existence for the first time on April 13, 1962, The partnership agreement clearly shows that the partnership came into existence only on April 13, 1962. This discrepancy between the two documents was emphasised by the Tribunal in support of its conclusion that the agreement in question was a mere make-believe document. The Tribunal also took into consideration that, out of the partners, two were minors who could not have rendered any assistance in the matter of selling the products of the assessee-firm; thereeof the partners of the firm were ladies who had no prior business experience and, consequently, they would have been of little assistance in carrying on the activities of the selling agency firm. The only male adult who was the partner in the selling agency firm was Kanta Prasad Bagaria, who had only a 1/9th share in the profits of the firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y discussed the oral evidence. But it is not correct to say that the oral evidence has been ignored. In paragraph 6 of the Tribunal's order, it notices the reliance placed by the assessee on the oral evidence. But it declined to place any reliance on the same. In paragraph 9 of its order, the Tribunal observed : "If the matter had to be decided only on the basis of the agreement, the partnership deed of the selling agency firm and the statements of the customers and of the partners of the selling agency firm and we have to take them at their face value, we would not have been inclined to interfere with the decision of the Appellate Assistant Commissioner that the selling agency commission was incurred, wholly and exclusively for the purpose of the business ; but we are obliged to hold that the so-called selling agency arrangement was only a make-believe arrangement, as a device for minimising the tax liability of the assessee-firm and that it is not a genuine business arrangement." After saying so, it proceeded to give reasons in support of that conclusion. In other words, the Tribunal thought that it is unable to accept the oral evidence at its face value in view of the surrou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties to challenge a conclusion of fact drawn by the Tribunal on the ground that it is not supported by any legal evidence or that the impugned conclusion drawn from the relevant facts is not rationally possible. If such a plea is established, the court has to consider whether the conclusion in question is not perverse and should not, therefore, be set aside. It is not possible to say, on the facts and in the circumstances of this case, that the conclusion of fact drawn by the Tribunal is not supported by any legal evidence or that the same could not be rationally arrived at. In Commissioner of Income-tax v. A. Raman & Co. this court restated. the well-accepted proposition that the law does not oblige a trader to make the maximum profit that he can out of his trading transactions. Income which, accrues to a trader is taxable in his hands but income which he could have, but has not earned, is not made taxable as income accrued to him. Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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