- (1.) THIS order will dispose of Income-tax Cases Nos. 10 and 11 of 1975. Income-tax Case No. 11 pertains to the assessment year 1968-69, whereas Income-tax Case No. 10 pertains to the assessment year 1969-70.
(2.) BRIEFLY stated the facts of this case are that the assessee is a private limited concern carrying on the business in the manufacture of nuts and bolts. During the assessment years 1968-69 and 1969-70, relevant to the accounting periods ending 31st March, 1968, and 31st March, 1969, respectively, the shareholders of the company were three sons of Dhirat Ram, Dhirat Ram himself, Smt. Sudarshan Goel and L. Lachhmi Chand. The company appointed Messrs. Bharat Sales Corporation, Jullundur City, as its sole selling agents with effect from 1st April, 1957, by virtue of an agreement for a period of 10 years. The commission agreed was at the rate of 10 per cent. On 1st October, 1968, by subsequent agreements the commission was reduced from 10 per cent. to 7 1/2 per cent. for the sales effected with effect from 1st of April, 1968, to 30th September, 1968, and from 7 1/2 per cent. to 5 per cent for the sales effected with effect from 1st of October, 1968, onwards.
(3.) IN terms of the above agreement, the assessee paid commission of Rs. 42,475 and Rs. 48,498 for the assessment years 1968-69 and 1969-70, respectively. The ITO allowed a sum of Rs. 19,791 for the payment of commission for the assessment year 1968-69 and disallowed the balance of Rs. 22,684 for the same assessment year. For the assessment year 1969-70, out of the commission of Rs. 48,498 he allowed Rs. 19,498 and disallowed Rs. 29,000 under Section 40 (c) of the I. T, Act, 1961 (hereinafter called the Act ).;