Commissioner of Income Tax vs D.M. Chatia (Industry)

G.G. Sohani, J.—The order in this case will also govern the disposal of Miscellaneous Civil Case No. 96 of 1985.

These are applications u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as " the Act ").

The material facts giving rise to these applications, briefly, are as follows :

The assesses is a registered partnership firm carrying on business in cloth. For the assessment years 1972-73 and 1973-74, the assessments were reopened and the Income Tax Officer disallowed payment of commission of Rs. 55,000 in the assessment year 1972-73 and of Rs. 82,622 in the assessment year 1973-74 on the ground that these payments were made by the assessee by way of commission to M/s. Vallabh Textile & Wool Traders, which was a proprietary concern of one of the partners of the assessee-firm. The Income Tax Officer, therefore, held that the payments were not deductible in view of the provisions of Section 40(b) of the Act. On appeal, the Appellate Assistant Commissioner upheld the disallowance but, on further appeal, the Tribunal held that the provisions of Section 40(b) of the Act were not attracted. The Tribunal, therefore, deleted the additions made by the Income Tax Officer to the total income of the assessee. Aggrieved by that order, the Revenue submitted applications for making reference but those applications were rejected. Hence, the Revenue has filed these applications.

Having heard learned counsel for the parties, we have come to the conclusion that the following question of law does arise in these cases :

" Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount of commission paid by the assessee to M/s. Vallabh Textile & Wool Traders, Ludhiana, a proprietary concern of one of the partners of the assessee-firm, was deductible in computing the total income of the assessee and that the provisions of Section 40(b) of the Income Tax Act, 1961, were not attracted ?"

The applications are, therefore, allowed. The Tribunal is directed to state the case and refer the aforesaid question of law to this court for its opinion. In the circumstances of the case, parties shall bear their own costs of these applications.