TMI Blog2008 (2) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... R. D. Jolly with Mohit Jolly for the respondent. JUDGMENT The judgment of the court was delivered by MADAN B. LOKUR J.— The assessee is aggrieved by an order dated January 31, 2006, passed by the Income-tax Appellate Tribunal, Delhi Bench "A", in I. T. A. No. 3729/Delhi/2001 relevant to the assessment year 1997-98. 2. The assessee is engaged in the business of trading of industrial and electronic items and it commenced production activity in electrical equipments, such as circuit breakers. During the previous year relevant to the assessment year 1997-98 the assessee claimed expenses on account of commission and discount of Rs. 18,78,623. Out of this we are concerned with an amount of Rs. 9,05,862 said to have been paid as co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and M/s. Ram Agencies and it was mutually agreed that the commission at 6 per cent. would be paid to M/s. Ram Agencies on the business procured through them. 7. It was held that even though there was no written agreement between the assessee and M/s. Ram Agencies, there was an internal note of the assessee regarding payment of commission and M/s. Ram Agencies had also raised a bill for payment of commission. It was held that the details of invoices were supplied by M/s. Ram Agencies and payments were made to M/s. Ram Agencies by account payee cheques. It was consequently held that there was no reason to doubt the genuineness of the transactions between the parties. On this basis, the assessment order was set aside by the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction could be entered into on the basis of an oral understanding particularly when there was nothing to suggest that the assessee and M/s. Ram Agencies had any longstanding relationship. 11. With regard to the existence or otherwise of a written agreement between the parties, our attention has been drawn to Lachminarayan Madan Lal v. CIT [1972] 86 ITR 439 (SC) wherein it has been held by the Supreme Court that even if there is an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, that does not bind the Income-tax Officer to hold that the payment was made exclusively and wholly for the purposes of. the assessee's business. The Supreme Court observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understanding between the parties was an oral understanding and it appears to be doubtful that such an oral understanding can be arrived at without any longstanding relationship having been established between the assessee and M/s. Ram Agencies. It seems a bit out of place that the parties entered into an oral business relationship involving such huge amounts of money over a period of time. 14. What is a substantial question of law has been dealt with by the Supreme Court on several occasions and the guiding tests have been culled out in Mahavir Woollen Mills v. CIT [2000] 245 ITR 297 (Delhi) wherein it is held as follows (page 300) "The words 'substantial question of law' has not been defined. But the expression has acquired a de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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