COMMISSIONER OF INCOME TAX Vs. SOHAN LAL NAYYAR

JUDGEMENT

(1.) Shri S. L. Nayyar, who will be referred to as the assessee, was a partner of the firm of M/s Beli Ram and Sons. Under an arrangement with the other partners of the firm, the assessee was entitled to receive commission of 1% on the sales effected by the firm in addition to a salary of Rs. 1,000.00 per month. The payment of the salary and commission was in consideration of the services of the assessee in promoting the sales of the firm. The assessee entered into an agreement dated 1-4-1960 with one Shri Laxmi Narain, who was an employee of the firm incharge of the Sales Section. Under this agreement, the assessee agreed to pay i per cent out of his own commission to Shri Laxmi Narain if the sales reached Rs. 15 lakhs per year ; but no commission was payable to him if the above target of sales fellshort by more than 10%. During the previous year, relevant to the assessment year 1961-62, the assessee paid a sum of Rs. 7,568.00 to Laxmi Narain under the agreement dated 1-4-1960 and the assessee claimed deduction of this amount in computing his own share of income from the firm.

(2.) The Income-tax Officer rejected the assessee's claim on the following grounds, namely,-

(3.) The assessee preferred an appeal to the Appellate Assistant Commissioner. The latter disagreed with the view of the Income-tax Officer that the agreement between the assessee and Shri Laxmi Narain was not a genuine agreement. After examination of the evidence led before him, he was satisfied that services were in fact rendered by Shri Laxmi Narain to the assessee, that remuneration was in fact paid by the assessee to Shri Laxmi Narain in lieu of such services and that the agreement between the assessee and Shri Laxmi Narain was a genuine agreement. He, therefore, allowed the assessee's claim.