- (1.) Civil Appeal No. 1569 of 2007 is directed against the judgment and order dated 31.03.2005 of the High Court of Kerala by which in exercise of jurisdiction under Section 256(2) of the Income Tax Act, 1961 (as it then existed) (hereinafter for short 'the Act') the questions reframed by the High Court have been answered against the appellant-assessee and in favour of the revenue. The question decided by the High Court and relevant to the present appeal relates to the entitlement of the assessee to the benefit of disallowance of commission purportedly paid by the assessee to its commission agents for procurement of order for supply of liquor. Following the aforesaid judgment of the Kerala High Court, the Karnataka High Court had decided a similar question arising in Income Tax Appeal No. 12 of 1999 and Income Tax Appeal Nos. 42, 44, 46 and 47 of 2001, in a like manner i.e. against the assessee and in favour of the revenue. Aggrieved by the aforesaid orders of the High Court of Karnataka which pertains to different assessment years, Civil Appeal No. 3214 of 2011 and Special Leave Petition (C) No. 10080 of 2014 have been filed by the assessee. In view of the fact that the decision of the Karnataka High Court in I.T.A. No. 12 of 1999 had followed the decision of the Kerala High Court impugned in Civil Appeal No. 1569 of 2007 and the decision of the Karnataka High Court in the subsequent appeals before it (impugned in Civil Appeal No. 3214 of 2011 and Special Leave Petition (C) No. 10080 of 2014) essentially follows the decision rendered in I.T.A. No. 12 of 1999, it will be necessary first to deal with the issues arising in Civil Appeal No. 1569 of 2007 and depending on the decision therein the remaining appeals will have to be accordingly answered.
(2.) Succinctly, the appellants are engaged in the manufacture and sale of beer and other alcoholic beverages. Certain States like Kerala and Tamil Nadu had established marketing corporations which were the exclusive wholesalers of alcoholic beverages for the concerned State whereby all manufacturers had to compulsorily sell their products to the State Corporations which, in turn, would sell the liquor so purchased, to the retailers. It is pleaded by the appellants that manufacturers of beverages containing alcohol have to engage services of agents who would co-ordinate with the retailers and State Corporations to ensure continuous flow/supply of goods to the ultimate consumers. And on that ground they sought deduction under Section 37 of the Act. Civil Appeal No. 1569 of 2007
(3.) The claim made by the assessee in the facts noted above was disallowed by the Assessing Officer by order dated 29.01.1993. The said order of the Assessing Officer was confirmed by the Commissioner of Income Tax (Appeals) by order dated 29.10.1993. The assessee had moved the learned Income Tax Appellate Tribunal, Cochin Bench against the aforesaid orders. The learned Tribunal took the view that the assessee was entitled to claim for deduction. The said view of the learned Tribunal has been reversed by the High Court in the Reference made to it under Section 256 (2) of the Act.;