SUHAS CHANDRA SEN, J. - (1.) THE Tribunal has referred the following three questions of law of this Court under S. 256(1) of the IT Act. "1. Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the selling agents commission of Rs 30,000 and Rs. 11,675 paid to Sunder Electric Mart and Shri A.N. Shukla was not paid out or expended wholly and exclusively for the purpose of assessee's business? 2. Whether on the facts and in the circumstances of the case the Tribunal was justified in holdings that the Technical Service Fees amounting to Rs 35,617.50 payable to Belliss and Morcom Ltd. U.K. under the agreement dt. 30th Dec., 1974 subsequently confirmed by a debit note issued on 21st June, 1977 in terms of the said agreement, was not an expenditure allowable in the asst. yr. 1978- 79 ? 3. Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the expenses incurred by the applicant amounting to Rs. 48,778 in respect of packages of goods are not entitled to additional deduction under S. 35B of the IT Act,"
(2.) THE assessment year involved in this Reference is the asst. yr. 1978-79, for which the relevant period of account is year ending on 31st Dec., 1977. In the first question, the finding of fact made by the Tribunal has not been challenged. Specific finding of fact by the Tribunal is that the IAC had disallowed the claim of the assessee on the ground that the assessee failed to produce any necessary supporting evidence or details regarding the services rendered by the selling agent. The CIT(A) while confirming the finding of the IAC held that sufficient justification was not made out for these payments. The Tribunal upheld the additions by pointing out that the counsel for the assessee was unable to produce any supporting evidence in regard to the actual services rendered by the two selling agents. The Tribunal thus held as follows: "We have considered the submissions of the parties concerned and we are of the opinion that the CIT(A)" order does not require any interference in this regard. The assessee's learned counsel was unable to produce before us any evidnce in regard to the actual services rendered by the two selling agents. It is also found from the IAC's order that the assessee, in spite of opportunity given, as per letter dt. 6th March 1981, did not furnish any supporting evidence nor details in regard to the exact nature of the order produced (sic-procured) by the two selling agents. Besides stating that the payments have been authorised by the Board of Directors and that the two sums of Rs. 30,000 ant Rs, 11,875 have been paid by account payee cheques, no other evidence has been produced to show that. Sunder Electric Mart and Shir A.N. Shukla procured orders by rendering special services to the assessee-company and consequently we are satisfied that the expenditure claimed was not laid out or expended wholly and exclusively for the purpose of assessee's business. Both the additions are accordingly upheld." In view of the fact found by the Tribunal, which have not been challenged as perverse, the question no. 1 must be answered in the affirmative and in favour of the Revenue.
(3.) THE second question relates to disallowance of Rs. 40,364 being 'adjustments relating to previous years' the Tribunal in the Statement of Case has recorded its finding as follows: "We have considered the submissions of the parties concerned. In regard to the first sum of Rs. 4,746 it is found on a perusal of the journal entries dt. 31st Dec. 1976 about which necessary evidence has been furnished now before us, that a sum, of Rs. 6,329.11 has been debited to suspense account by crediting commission account being the amount due as on 31st Dec., 1976 to Gokok Patel Wolkart Ltd. and a further sum of Rs 998.55 has been debited to commission account by crediting suspense account . The evidence so furnished do not clarify the point raised by the IAC -whether commission payable to Gokok Patel Wolkart Ltd. was credited twice during the accounting year ending 31st Dec., 1976. The assessee's counsel, however, agreed to furnish necessary evidence in that regard in case another opportunity was given to the assessee. We accordingly restore the matter on the IAC's file with a direction to examine afresh whether the assessee's contention that a sum of Rs 4,746.74 was credited twice in the account relevant to 1976 was correct or not. In case the assessee is able to produce necessary evidence in that regard, the said sum of Rs. 4,746 should be allowed in recomputing the assessee's income for the assessment year under appeal while giving effect to this order. In regard to the technical fees payable to the assessee's Holding Company in U.K. amounting to Rs. 35,617.50, we are satisfied that the assessee's liability for payment of this amount arose on 30th Dec., 1974, when the terms of the original agreement were revised w.e.f. 1st April., 1974. The assessee was aware of its liability as and when the agreement was entered into with its U.K. principals. The subsequent receipt of the debit not from the U.K. principals, in our opinion cannot entitle the assessee for deduction of the said amount on accrual basis. The addition of Rs., 35,617 is accordingly upheld." ;