- (1.) THE Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law for our opinion: " Whether, on the facts and circumstances of the case, the sum of Rs. 45,380 paid' to L. Gurandittamal and L. Sahibdiyal, employees of the applicant firm, is permissible deduction in computing the business income of the applicant ? "
(2.) IN order to answer the question, it is necessary to advert to the relevant facts. The assessee is a partnership firm. It holds the sole selling agency of Messrs. Oriental Carpet Manufacturers (India) Private Ltd. in respect of sale of yarn, cloth and blankets manufactured by the said company. The assessee was receiving commission as selling agent and over and above that commission, it started receiving overriding commission at 2 1/2 per cent, on the total sales effected. The overriding commission thus received by the assessee is as follows: AA Assessment Amount year received Rs. 1960-61 35,964 1961-62 61,818 1962-63 83,922 1963-64 1,13,449
(3.) THE turnover of the assessee increased from Rs. 39. 99 lakhs during the year relevant to the assessment year 1962-63 to Rs. 54. 28 lakhs during the year under consideration, namely, 1963-64. The assessee-firm paid during the previous year relevant to the assessment year 1963-64 to each of its employees, Gurandittamal and Sahibdiyal, commission @ 1/2 per cent, on the sales effected out of the overriding commission received by it from Messrs. Oriental Carpet Manufacturers (India) Private Ltd. It may be mentioned that these two employees were receiving salary at Rs. 1,000 per month from the assessee-firm. The Income-tax Officer, for the assessment year in question, computed the total income of the firm at Rs. 3,08,034 and while computing the said income by his order dated 24th August, 1967, disallowed an amount of Rs. 45,380 representing 1/2 per cent, commission paid by it to the said two employees.;