COMMISSIONER OF INCOME TAX Vs. GOGTE TEXTILES LIMITED

JUDGEMENT

(1.) THIS reference is made to this court by the Tribunal under Section 256(1) of the Income-tax Act, 1961 (in short the "Act"). The question of law involved herein is--

(2.) THE assessee is a limited company. While framing the assessment order for the assessment year 1985-86, the Assessing Officer, among various other additions/disallowances, took into consideration the commission paid to the agents, for the purpose of disallowance under Section 37(3A) of the Act. He also deducted the amount of Central subsidy received by the assessee from the cost of the assets to arrive at the depreciation allowable for the year. In an appeal filed by the assessee, the Commissioner (Appeals) held that the commission paid to the agents should not be taken into consideration for the purpose of disallowance under Section 37(3A) and the depreciation should be allowed without deducting the subsidy from the cost. Against the order of the Commissioner (Appeals), the Department appealed before the Tribunal. Following the judgment of the Calcutta High Court in the case of CIT v. Sutlej Cotton Mills Ltd. , the Tribunal held that the commission paid on actual sales cannot form sales promotion expenses.

(3.) THE above judgment has been followed with approval by a subsequent Division Bench of this court in the case of CIT v. Klas Engineering (P.) Ltd. [2002] 258 ITR 779 (I. T. R. C. No. 122 of 1998, dated November 29, 1999), wherein it has been held that (page 780) :