TMI Blog2004 (8) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... said firm was (not) wholly and exclusively for the purpose of business of the assessee-company. - Tribunal was in law justified in deleting the additions on account of commission to the sole selling agents – further, Tribunal was legally correct in deleting the disallowance of Rs. 3,401 and Rs. 3,460 being interest paid to the trust in respect of contribution to the provident fund - - - - - Dated:- 3-8-2004 - Judge(s) : R. K. AGARWAL., K. N. OJHA. JUDGMENT The Income-tax Appellate Tribunal, Allahabad, has referred the following questions of law under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") for the opinion to this court: "(1) Whether, on the facts and in the circumstances of the case, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar sold in the open market. The Income-tax Officer found that because of the control, there was scarcity of sugar and it was selling at a very high price in the open market and, hence, there was no necessity for the appointment of sole selling agent to push up the sales. He further found that in the previous four assessment years the assessee had shown heavy losses while in these two years it had shown net profit and, therefore, it was a period of boom and the appointment of agent was hardly guided by commercial considerations. He further found that the firm came into existence as a result of a deed of partnership executed on that very date, i.e., on April 15, 1968, and is controlled by the relatives of the directors of the assessee-compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry that the resolutions passed by the board of directors required any sanction of the Central Government. The genuineness of the agreement as also of the payments have not been doubted. There are two main objections which have been taken, firstly, that there was no necessity for the assessee to appoint a sole selling agent and, secondly, that the selling agent did not render any service. We have shown above that the existence of necessity is not a valid test for allowability of an expenditure under section 37. Anyhow, as a fact, necessity has been proved and it was the rise and fall in the market trends and the prices of sugar. 40 per cent, of the sugar was released for free sale in the open market and in order to have the best price and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntribution to the provident fund is concerned, it may be mentioned here that the apex court in the case of Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 has held that interest for delayed payment of statutory dues is an allowable deduction under section 37 of the Act. Interest on delayed payment of provident fund cannot be termed as damages under section 14B of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, as such damages have been held by this court to be penal in nature and not allowable as business expenditure under section 37 of the Act in the case of CIT v. Kamlapat Motilal [1988] 172 ITR 438. The Gujarat High Court in the case of CIT v. Visnagar Taluka Mazdoor Sahakari Mandali Limited [1987] 163 ITR 224 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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