VIZAGAPATNAM SUGARS AND REFINERY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under S. 66(1) of the Indian IT Act. The assessee is a public limited company incorporated in 1935 manufacturing sugar and its bye products. The assessments relate to the years 1950 51, 1951 52 and 1952 53, the accounting years being the three years ending with 30th June, 1949, 30th June, 1950 and 30th June, 1951. In respect of its business, the company resolved to issue mortgage debentures of the value of Rs. 2.5 lakhs. The resolution of the board of directors relating thereto is dated 15th April, 1941. This resolution of the board of directors was confirmed by a resolution of the company at its extraordinary meeting held on 4th June, 1941. It was further resolved that the company do pay brokerage not exceeding 2.5per cent and such commission on the sales of sugar for such period as the company may determine to such person or perrons as may negoliate in ebseuplion the of said dubeutives in due course, the debentures of the value of Rs. 2.5 lakhs were issued and subsequently allotted. The brokerage of 2.5per cent mentioned above was also paid. As regards the commission on the sales of sugar mentioned above, an agreement was entered into between the assessee company and Jivanchand Ratanchand Motishaw of Bombay on 28th Dec., 1941, that he was to be paid a commission of 4 annas per Bengal maund of sugar sold during the period commencing from 1st Jan., 1941, and ending with 31st Dec., 1961. In respect of the three years to which the concerned assessments are made, the commission so paid to the underwriters was Rs. 45,503, Rs. 13,362 and Rs. 40,465 respectively. These amounts were claimed by the assessee as admissible deductions in the respective assessment years. The ITO and the AAC as well as the Tribunal, Hyderabad Bench, disallowed this claim. The assessee filed three applications before the Tribunal to refer to the High Court the question of law which arose out of the decision of the Tribunal. The three applications were consolidated and the Tribunal referred the following question to the High Court for decision :

(2.) THE relevant portion of the resolution dated 15th April, 1941, of the board of directors is as follows :

(3.) IT is on these facts that the assessee claimed the three amounts of Rs. 45,503, Rs. 13,362 and Rs. 40,465 as admissible deductions in respect of the assessments for the three assessment years. The claim of the assessee that these three amounts are admissible deductions is based on S. 10, Clause (2), sub cl. (xv), of the Indian IT Act, which is as follows: