TMI Blog1966 (9) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... the following question : " Whether, on the facts and circumstances of the case, the sum of Rs. 2,88,504 is allowable as a deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922 ? " The assessment year involved was 1954-55. The assessee is a public limited company and they claimed a deduction of Rs. 5,60,245 as 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. 2,71,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f coal to the Headquarters, Japan Procurement Agency, Yokohama. The Tribunal further found, on a perusal of the correspondence produced by the assessee, that they (the assessee) had agreed to pay Messrs. Republic Chemical Corporation Japan Ltd. commission of 1.723 U.S.A. dollars per ton of coal supplied to the Headquarters, Japan 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the assessee obtained any monopoly rights nor any abnormal concessions in regard to the supply of coal in that country or to their purchasers. It was nothing more than securing an order for supply of coal from a customer which was, in the ordinary course, a business of the assessee. It was neither an extension of their business 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insulated and Helsby Cables Ltd., where the respondent-company claimed a deduction in respect of a sum contributed to a pension fund in accordance with a trust deed on the ground that substantial and lasting advantage was obtained by the assessee-company, that was held not be an expenditure which could be said to be an integral part 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tages of enduring benefits and not incidental to the business itself. It cannot be said that the facts of any of the four cases above can be brought at par with the circumstances and facts of the present one as found and accepted by the Appellate Tribunal. There was no dispute from the side of the revenue that commission was paid by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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