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TMI Blog1966 (9) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... s expenditure incurred wholly for the purpose of their business which they paid as commission to Messrs. Republic Chemical Corporation, America. The Income-tax Officer, in the first instance, allowed that expenditure to the extent of Rs. 90,576 and disallowed the balance of the claim. On appeal by the assessee, the Appellate Assistant Commissioner allowed the commission at the rate of three per cent., i.e., Rs. 2,71,840, out of the assessee's claim. Since the balance of Rs. 2,88,504 was disallowed by him, the assessee came in appeal before the Income-tax Appellate Tribunal. They examined the assessee's claim and the correspondence produced by the assessee in that respect. From the two contracts that were produced before them, they found tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pan Procurement Agency, Yokohama. This rate was also found by the Tribunal to be in accord with the normal commercial transaction, although the rate was high. In that view, the Tribunal allowed the entire claim of the assessee about payment of commission on sale of coal in Japan under the two contracts. It is to be mentioned that the first contract stipulated for a rate of commission of 9.5 per cent., whereas in the second contract the commission rate was three per cent. The revenue wanted the Tribunal to state a case in regard to the allowing of commission in excess of three per cent. but since the Tribunal refused to state the case, the revenue obtained a rule from this court. Learned counsel appearing for the revenue contended that, sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nor any exclusive rights in regard to supply of coal in that country. The assessees were carrying on the business of supply of coal in this country and in normal course, through the help of their agents, they approached customers and secured their orders from time to time. The activity that resulted in the first contract, dated the 30th of June, 1952, in Japan, was in no way different from the activities of the assessee's business in this country. The mere fact that a customer was found outside the country will not make any difference in the nature of expenses incurred in payment of commission to the assessee's agent in Japan or in this country. It is a normal practice in the commercial world to yield to a high rate of commission or to gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of earning profit in that business. Similarly, in the case of Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax, the assessee obtained monopoly rights and payments made in that connection were taken to be expenditure incurred for an asset or advantage. In that case, their Lordships of the Supreme Court held that whether a particular expenditure can be allowed as a revenue expenditure will depend upon the facts of that case. Their Lordships observed that the aim and object of the expenditure would determine the character of the expenditure, whether it is a capital expenditure or a revenue expenditure. There cannot be any doubt that the payment which was made to secure the outstanding advantage, such as the monopoly rights, cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee to their agent in Japan at the stipulated rate, nor was it contended that it was out of the run of the commercial practices obtaining in that country or in regard to the business practice of the assessee. Learned counsel appearing for the assessee referred us to the case of Bombay Steam Navigation Co. Private Ltd. v. Commissioner of Income-tax, in which two shipping companies were amalgamated and interest was paid on the unpaid purchase price of the shares of one of the amalgamated companies by the other. That payment of interest was held to be incidental to carrying on of the business and not to securing any enduring benefit to the assessee-company. There, their Lordships of the Supreme Court held that the incidence of comm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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