MEENA, J. - (1.) IN compliance with our direction under S. 256(2) of the IT Act, 1961 ('the Act'), the Tribunal has sent the statement of the case and referred the following questions : "1. Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that Industrial Service Centre rendered services justifying the payment of commission of Rs. 22,36,555 was based on any relevant materials of perverse? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the disallowances on the sales commission of Rs. 22,36,555 was unjustified?"
(2.) THE assessee, Hindusthan Development Corpn. Ltd., is a public Limited company and, inter alia, it carried on business of manufacture of Calcines Petroleum Coke (CPC). In the year under consideration the assessee has made the payment of commission of Rs. 22,36,555 to Industrial Services Centre (ISC). This commission has been paid on account of sales of the assessee's product. The sales had taken place at the instance of ISC. From records it appears that the firm ISC consists of two partners, Smt. Uma Jaipuria and Sri Ramakant Sureka. Both partners were summoned to find out whether any service for sale of assessee's product has been rendered by the firm ISC. The statements of Sri Ramakant Sureka are recorded as well as of S.K. Jaipuria who is the husband of Smt. Uma Jaipuria. In his statement Sri. Jaipuria accepts that the major sale of the assessee's products was through ISC. There was an agreement between the assessee and ISC for sale of the assessee's products and in pursuance of that agreement the firm ISC has rendered the services and commission has been paid by cheque and Sri Jaipuria was looking after the business of the firm as husband of Smt. Uma Jaipuria. After taking into account the statement of Sri Ramakant Sureka and Sri S.K. Jaipuria and also the materials placed before him, the ITO was of the view that no service has been rendered and the payment of Rs. 22,36,585 paid to ISC was not for the purpose of the assessee's. Therefore, he disallowed the said amount of commission and added it in the income of the assessee. In appeal before the CIT(A), the assessee has submitted the details of service and commission paid to ISC, by the assessee and also brought to the notice of the CIT(A) that the ITO has not even supplied copy of the statement of Sri Ramakant Sureka and Sri S.K. Jaipuria, which was recorded at the back of the assessee. Even no opportunity had been grated to the assessee to cross- examine Sri Sureka and Sri S.K. Jaipuria. On the request of the assessee, the copies of the statements of Sri Sureka and Sri Jaipuria were supplied. The details of service rendered by ISC to increase the sale of product of the assessee and details of monthwise payment made by the assessee were furnished. Considering those details the claim of the assessee was allowed. The matter was then taken before the Tribunal and the Tribunal has also affirmed the view taken by the CIT(A). The Tribunal found that the agreement was genuine, service has been rendered by ISC and even the sale has been increased after the agreement. The sale, in fact, increased from 12560 (M/T) to 20989 (M/T).
(3.) THEREAFTER , the Department filed an application under S. 256(1) for a reference of the question proposed and that application has been rejected by the Tribunal on the ground that the question proposed is a question based on a finding of fact. In compliance with out direction in application under S. 256(2), the statement of the case has been sent and aforesaid questions referred for our opinion.;