Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, the following questions of law have been referred to this court for the assessment year 1980-81 : "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the expenditure of Rs. 17,37,497 incurred on payment of commission on sales cannot be treated as sales promotion expenses and, therefore, it cannot be taken into account while computing the disallowance under Section 37(3A) of the Income-tax Act, 1961 ?" 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Appeals) directing the Income-tax Officer to allow the expenditure of Rs. 19,058 paid as penalty under Section 5C of the Rajasthan Sales Tax Act ?"
(2.) Shortly stated, the facts relating to the first question are that the assessee claimed deduction of Rs. 17,37,497 as selling commission. The Income-tax Officer disallowed 15% of this amount under Section 37(3A) treating it as sales promotion expenditure.
(3.) The matter was carried in appeal before the Commissioner of Income-tax (Appeals) who, following his order dated August 6, 1982, in the appeal in the case of Tins Products Ltd., directed the Income-tax Officer not to include the selling commission for the purpose of computing the disallowance under Section 37 (3A).;