Decided on December 18,1982



D.S. Meenakashisundaram, Judicial Member - (1.) THIS appeal by the revenue objects to the order of the Commissioner (Appeals) directing the ITO to assess the commission received by the assessee from its employer not as salary but as income from business and in further allowing deduction of expenses of Rs. 4,500 on account of travelling and Rs. 5,894 on account of car expenses out of the commission income received from the employer. The assessee has also filed a cross objection objecting to the order of the Commissioner (Appeals) on the ground that he had omitted to consider and dispose of certain other grounds relating to deduction of other expenditure claimed by him and on other points decided against him.
(2.) Shri J. M. Shah, the assessee herein, is a salesman in the service of Voltas Ltd. This appeal relates to his assessment year 1977-78 for the previous year ended 31-3-1977. The assessee declared a total income of Rs. 73,300. He also filed a salary certificate from his employer Voltas Ltd., regarding the salary paid to him which showed that the assessee was in receipt of commission amounting to Rs. 61,605 in addition to the salary and that tax had been deducted at source from this amount by the employer. The assessee had claimed expenses amounting to Rs. 14,730 from the said commission and declared a sum of Rs. 46,875 as the net commission received by him. The ITO held that in view of the fact that the assessee was getting salary and commission from the same employer and tax had been deducted at source by the employer from the said receipts, the commission was to be considered as income taxable under the head 'salary' and that, therefore, the assessee was not eligible for deduction of expenses amounting to Rs. 14,730 claimed by him. Accordingly, he rejected the assessee's claim for deduction of expenses. The ITO determined the total income of the appellant at Rs. 1,15,000.
(3.) THE matter went before the Commissioner (Appeals). Elaborate arguments were addressed before him about the head of income under which the commission receipts were chargeable in the hands of the assessee. After examining the materials placed before him by the assessee, the Commissioner (Appeals) held in paragraph 6 of his order that there was no doubt that the sum of Rs. 150 per month paid to the assessee along with dearness allowance, etc., fell to be assessed under the head 'Salary'. So far as the commission earnings are concerned the Commissioner (Appeals) pointed out that the assessee was free to conduct his business in the manner best suited to him, that his attendance in the office was not compulsory, that he did not sign the muster roll, and that in fact, he conducted the business mostly from his residence and very often from clubs and hotels where he entertained his customers. THE Commissioner further held that though there were certain clauses in the agreement between the assessee and Voltas Ltd. which specified the quantum of commission and also that in case other employees were also responsible for the sale, the commission has to be divided between the assessee and such employees, this could not be interpreted to mean that so far as commission earning was concerned the relationship between the assessee and Voltas Ltd. was that of master and servant. He pointed out that if the assessee in collaboration with some other person an outsider to Voltas Ltd. sold certain goods produced by Voltas Ltd., he had to share commission earning with such person also. On a reading of the terms and conditions of the assessee's agreement with Voltas Ltd. as a whole and with reference to several documents referred to in the other, the Commissioner concluded that so far as the commission earning was concerned, the assessee was free to conduct his business in the manner he thought it fit and, therefore, the relationship between the assessee and Voltas Ltd. for purposes of commission earning was not that of master and servant. He, therefore, agreed with the contentions of the assessee that earnings of commission could not be assessed under the head 'Salaries' but that should be properly assessed either under the head 'Business' or under the head 'Other sources'. In this view of the matter, the Commissioner directed the allowance of Rs. 4,500 out of the assessee's claim of Rs. 6,663 being travelling expenses as wholly and exclusively for the purposes of earning commission. Similarly, he directed the allowance of Rs. 5,894 out of car expenses as spent for earning the commission. Thus, the assessee's appeal was partly allowed. Both the revenue and the assessee felt aggrieved by the order of the Commissioner (Appeals) and hence, the present appeal by the revenue and the gross objection by the assessee.;

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