- (1.) THIS is a reference under Section 66(1) of the Indian Income-tax Act and the following question has been referred to us for decision :- Whether on the facts and in the circumstances stated above, the sum of Rs. 11,787 in the assessment year 1946-47 and the sum of Rs. 11,515 in the assessment year 1947-48 are special allowances, benefits or perquisites specially granted to meet expenses wholly and necessarily incurred in the performance of the duties of an office or employment of profit within the meaning of Section 4(3) (vi) of the Income-tax Act and as such exempt from taxation ?
(2.) THE assessee firm Messrs. Mamanchand Fakirchand works as commission agent and deals in tobacco and potatoes. Besides the usual commission, the assessee used to charge a sum of 8 annas per bag from customers to meet the expenses incurred in the supply of the commodities to them. THEse charges amounted in the assessment year 1946-47 to Rs. 11,787 and in the year 1947-48 to Rs. 11,515. THE assessee showed in its account books that in 1946-47 it had spent Rs. 11,796 and in 1947-48 Rs. 11,498. The Income-tax Officer, however, did not accept the entries in the account books as regards the expenses incurred and held that the assessee had in each year made an extra profit of Rs. 8,000 from this source which he added back to the income. Several objections were taken which were decided against the assessee and with which we are not concerned. The assessee had relied on the provisions of Section 4(3) (vi) of the Income-tax Act and claimed that the amount of 8 annas per bag was a special allowance granted to the assessee to meet the expenses wholly and necessarily incurred in the performance of its duties as commission agent. The Appellate Tribunal held against the assessee but decided to refer the question for our decision.
(3.) THE point raised before the Appellate Tribunal was that the amount of 8 annas per bag was a special allowance granted to the assessee who held an employment of profit to meet the expenses wholly and necessarily incurred for the purpose of its duties as commission agent. Reliance has been placed on behalf of the assessee on a decision of the Bombay High Court in Tejaji Farasram Kharawalla v. Commissioner of Income-tax, Bombay. That is the only case to which reference has been made by counsel. In that case the assessee was the representative of the Ciba (India) Ltd. He was getting a commission of 12 1/2 per cent. out of which 5 per cent. was to be taken by him as compensation in lieu of certain expenses that he had to meet in the discharge of his duties, such as commission to dyeing masters, agents, etc. The only question raised was whether exemption could be claimed only for the expense proved to have been actually incurred or for the entire amount of the 5 per cent. commissioner received. The Court held that the assessee was entitled to exemption for the whole of the 5 per cent. and not only for the amount proved to have been spent. The point raised before us is, however, entirely different.;