- (1.) FOLLOWING question of law has been referred for opinion of this Court by the Tribunal, Amritsar Bench, Amritsar, in respect of asst. yr. 1987 -88 : "Whether, on the facts and in the circumstances of the case, the CIT(A) and the Tribunal have rightly upheld the claim of the assessee for deduction of Rs. 3,33,658 and Rs. 7,10,029 allegedly paid as commission to Shri Neeraj Goel and late Shri B.M. Goel and whether the findings recorded by the CIT(A) and the Tribunal are perverse -
(2.) THE assessee is an exporter of hand -tools. Return declaring income of Rs. 3,82,990 was filed by the assessee on 31st amount of Rs. 3,33,652 to Shri Neeraj Goel, proprietor of M/s N.K. Rubber Industries, Jalandhar. Similarly, it was also found that the assessee had paid two cheques of Rs. 4,98,933 and Rs. 2,11,096 to M/s Punjab Rubber & Allied Industries, a proprietary concern of Shri B.M. Goel, who happened to be the father of Shri Neeraj Goel. The AO 1988.
(3.) THE CIT(A) and the Tribunal did not approve the said view and held that the commission paid was genuine business expenditure. Amounts paid as commission are permissible deductions. It was observed by this Court in CIT vs. Indo Asian Switchgears (P) Ltd. (2002) 173 CTR (P&H) 102 : (2002) 257 ITR 645 (P&H) : "Admittedly, the provisions of s. 37(3A) of the Act place an embargo on the expenses incurred on the advertisement, publicity and sales promotion. This would mean that the expenses claimed by an assessee in connection with the advertisement, etc., have to be scrutinised and reduced in accordance with the slab prescribed in s. 37(3A) of the Act. However, a discount allowed by an assessee to an agent is not an expense in connection with the publicity or advertisement, etc. It is an amount forgone by the assessee in favour of the dealer for effecting the actual sale. It is not like the fashion show conducted by a garment manufacturer, but a commission allowed to a dealer. Trade discount cannot be treated as a wasteful expenditure incurred by an assessee in connection with the sales promotion. It is not a gift as given on a festival or a free sample as distributed by a pharmaceutical company to the doctors but an actual commission allowed or paid to a dealer. It does not fall within the mischief of s. 37(3A) of the Act." ;