HEGDE, J. - (1.) THIS is an assessee's appeal by certificate under S. 66A (2) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the Act). The Income-tax Appellate Tribunal, Calcutta 'B' Bench as per the directions given by the High Court in an application under S. 66 (2) submitted the following question for ascertaining the opinion of the High Court. "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 1,56,806/- was wholly and exclusively laid out for the purpose of business and as such allowable as a business expenditure."
(2.) THE High Court has answered that question in the negative and in favour of the Revenue. THE correctness of the decision of the High Court is challenged before us by the assessee. The question referred to the High Court for its opinion proceeds on the basis that the facts and circumstances of the case as found by the Tribunal are not in dispute but what is disputed is the legal effect of the facts and circumstances found by the Tribunal. As held by this Court in the earlier decisions that when a question refers to the facts and circumstances in the case, it means the facts and circumstances as found by the Tribunal. If any party wants to challenge the correctness of the findings given by the Tribunal either on the ground that the same is not supported by any evidence on record or is based on irrelevant or inadmissible evidence or is unreasonable or perverse a question raising any one of those grounds must be sought for and obtained. It is needless to say that the jurisdiction of the High Court in a reference under S. 66 is only an advisory jurisdiction. That being so it can only pronounce its opinion on the questions referred to it. It is tritle to say that it cannot sit as an appellate Court over the decision of the Tribunal. Bearing these facts in mind, let us now proceed to set out the facts as found by the Tribunal. The controversy in this case relates to the assessment of the assessee for the assessment year 1955-56, the corresponding previous year being the financial year ending on March 31, 1955.
(3.) BY an agreement dates December 30, 1949, the assessee Company appointed M/s. J. K. Alloys Ltd. as the selling agents for selling its aluminium products. The agreement was effective for a period of 5 years from April 1, 1950. The relevant clauses of the agreement are 1, 2, 6, 8, 9, 14 and 15. They read thus : "1. That the Agents shall act as the Selling Agents of all Aluminium Ingots, Sheets, Circles, Expended Metal, Shots. Utensils and Anodised and alloy goods manufactured by the Principal. 2. That this Agreement shall commence from the 1st day of April, 1950 and shall continue, unless otherwise determined by mutual consent of the parties, till the 31st day of March, 1955. That the Principal will allow the Agents discount in the manner indicated hereunder on sale of all products of the Principal effected by the Agents either by themselves or through Sub-Agents appointed by them or directly by the Principle themselves : JUDGEMENT_37_4_1972Html1.htm Provided always that the rates of discount abovementioned or any of them may be varied by mutual consent of the parties. 8. That the Agents shall be responsible for payment of the price and all other moneys to the Principal immediately after the goods leave the Principal's works or godown. Such payment will be made on presentation of necessary papers or documents by the Principal to the Agents and not later than a fortnight after the date the goods shall have been despatched. In default of payment as aforesaid the Principal will be entitled to charge interest until, realisation at the rate of six per cent per annum on the balance for the time being outstanding. 9. That the Agents will be responsibile for the due fulfilment of all contracts made by them whether for ready or forward sales and also for the consequences of any breach of contract by any customer and for all losses and damages arising therefrom to the Principal provided there shall be no default on the part of the Principal when manufacturing or giving delivery of any goods required or sold under any contract in compliance with the stipulations thereof. 14. That the parties may by mutual consent agree to continue after the expiry of the 31st day of March, 1955 on the same terms and conditions as are herein detained or any modification thereof as they may decide in which case the agency business shall be terminated by either party giving to the other less than three months' notice in writing sent by Registered Post and such notice shall be deemed to have been given seven days after the same has been posted. 15. Notwithstanding anything contained in any of the foregoing clauses if the Agents shall fail to make any payments as herein provided or commit any breach of any covenant herein contained and on the part of the Agents to be observed and performed the Principal shall have right at any time to terminate this Agreement by giving to the Agents one month's notice in respect thereof." 6. In the relevant year of account, the assessee paid to M/s. J. K. Alloys Ltd. Rs. 1,56,806/- as selling agency commission in accordance with the terms of the agreement. The Income-tax Officer disallowed the claim for deduction of that amount on the ground that the payment had not been made on business considerations. On appeal the Appellate Assistant Commissioner agreed with the conclusion reached by the Income-tax Officer that the payment had been made for some extra commercial considerations but he further held that the agreement had not been acted upon. On a further appeal, the Income-tax Appellate Tribunal opined that it was unable to concur with the view taken by the Income-tax authorities that the agreement had not been acted upon and that the payment had been made for some extra commercial considerations. In the course of its order it observed : "There is no dispute that the amount in question was actually paid as commission to Messrs. J. K. Alloys Ltd. It is also common ground that all the sales during the year were effected directly by the appellant and no sales were effected by the selling agents. On these facts, the Appellate Assistant Commissioner concluded that the agreement had not been acted upon and that the payment was made for some extra commercial considerations. We are afraid, we are unable to concur with the Appellate Commissioner. The mere fact that no sales were effected during the year of account by the selling agents themselves does not, necessarily, mean that the agreement was not acted upon. In fact, clause 6 of the agreement quoted above explicitly refers to the fact that the agents shall be entitled to the payment of the discount even if all the sales were effected directly by the Principals themselves. The agreement has not been impugned by the Department as a sham and collusive transaction in fact the entire selling agency commission paid to Messrs. J. K. Alloys Ltd. had all along been allowed by the Department as an admissible expenditure in the hands of the assessee upto the assessment for the year 1954-55. Evidently, the agreement in question had been entered into bona fide and had been acted upon." ;