1,13,449/ during the previous year companyresponding to the assessment year 1963 64, the assessee decided to give to each of Saheb Dayal and Gurdita Mal, who were look ing after the business and were primarily responsible for the increased prosperity of the assessee, companymission at the rate of 1/2 of the sales out of 21/2 overriding companymis sion received from OCM and each of these two employees was accordingly paid by the assessee a sum of Rs.
The matter was carried in further appeal before the Tribu nal, but the Tribunal also took the same view and held that since there was numberproof to show that any services were rendered by Saheb Dayal and Gurudayal Mal for which payment of companymission in addition to salary and bonus companyld be justified, companymission companyld number be said to have been paid for services rendered so as to attract the applicability of section 36, subsection 1 clause ii .
35,964/ 1961 62 Rs.
Appeal by Special Leave from the Judgment and Order dated the 18th August, 1971 of the Punjab and Haryana High Court in Income Tax Reference No.
Saheb Dayal and Gurditta Mal were .looking after the busi ness of the assessee since a long time and they were each paid remuneration of Rs.
The view taken by the High Court was that in order to attract the applicability of section 36, sub section 1 , clause ii , it was necessary that the payment of companymission should be for services rendered and since there was numberevidence led on behalf of the assessee to show that any extra services were rendered by Saheb Dayal and Gurditta Mal, which were responsible for increase in the sales and companysequent enlargement of the overriding companymission, there was numberjustification for payment of companymission to them and the companymission paid companyld number be said to be for services rendered.
The business of the assessee companysisted of sole selling agency of OCM in respect of yarn, cloth and blankets manufactured by OCM and for the sales affected by the assessee as such sole selling agents, companymission was paid to the assessee by OCM.
61,818/ 1962 63 Rs.
The aggregate amount of companymission paid to Saheb Dayal and Gurditta Mal thus came to Rs.
1000/per month.
22,690/ by way of companymission.
83,922/ 1963 64 Rs.
45,380/ paid to L. Gurandittamal and L. Sahebdiyal, employees of the applicant firm is permissi ble deduction in companyputing the business income of the applicant ?
45,380/ and this amount of companymission was claimed by the assessee as a deductible expenditure in its assessment to income tax for the assessment year 1963 64.
1,13,449/ Since the turnover of the sales reached the figure of Rs.
Since the assessee showed very satisfactory turnover from year to year, OCM started giving to the assessee, in addition to the usual companymission, over riding companymission at the rate of 21/2 on the sales affected by the assessee and the.
54.28 lacs and overriding companymission increased to Rs.
54.28 lacs for the as sessment year 1963 64.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
17 of 1971.
over riding companymission thus re ceived by the assessee during the previous years companyrespond ing to the assessment year 1960 61 to 1963 64 was as fol lows Assessment year Amount Received 1960 61 Rs.
The Income Tax Officer, disal lowed the claim of the assessee on the ground that there was numbermaterial produced by the assessee which would prove the nature of services rendered by these two gentlemen in lieu of which the companymission is claimed to have been paid and there being numberevidence to show that the increase in sales during the relevant accounting year was due to the efforts of Saheb Dayal and Gurditta Mal, the claim for deduction of the amount of companymission as a business expenditure remained unproved.
1011 of 1972.
T. Desai, Mrs. A.K. Verma and Shri Narain for the Appellant.
The assessee appealed against the disallowance of the amount of companymission but the Appellate Assistant Commis sioner in appeal affirmed the disallowance on the ground that numberevidence had been produced by the assessee to prove that the activities of Saheb Dayal and Gurditta Mal in the relevant account year were or a nature different from those in the earlier years or that they put in any extra time or energy,in the companyduct of the business of the assessee so as to justify the payment of the companymission and hence it companyld number be said that the companymisson was paid for services rendered by them.
39.99 lacs for the assessment year 1962 63 to the figures of Rs.
The assessee being aggrieved by the order made b the tribu nal applied for a reference of the question of law arising out of the order of the Tribunal and on the application of the assessee, the following question of law was referred for the opinion of the High Court Whether on the facts and circum stances of the case the sum of Rs.
Ltd. hereinafter referred to as OCM .
Thus, from amongst the partners, only Madan Lal was looking after the day to day management of the business of the assessee and he was assisted by Saheb Dayal and Gurditta Mal who were engaged as employees of the assessee.
During the accounting year relevant to the assessment year 1963 64, Chaman Lal and Harbans Lal had their own independent factories and hence they were number attending to the business of the assessee and Raj Mohan too was number actively associated with the companyduct of the business of the assessee as he was working with the Oriental Carpet Manu facturers India Pvt.
A. Ramachandran and R.N. Sachthey for Respondent.
Chaman Lal was the son of Saheb Daval and Raj Mohan was the son of one Gurditta Mal.
The assessee is a registered firm which at all material times companysisted of five partners, namely, Chaman Lal, Madan Lal, Harbans Lal, Raj Mohan and Saheb Dayal representing a trust.
The figures show that the business of the assessee prospered from year to year from 1959 60 onwards and there was a gradual increase in the turnover of the assessee which jumped from the figure of Rs.
