COMMISSIONER OF INCOME TAX Vs. S S INDUSTRIES

JUDGEMENT

(1.) BY this application under S. 256(1) of the IT Act, 1961, the Revenue seeks a direction to the Tribunal to state a case and refer the following question, stated to be a question of law, arising out of Income -tax Appeal No. 298/(Del) of 1989, pertaining to the asst. year 1987 -88, to this Court for opinion :

(2.) THE assessee -firm is engaged in the manufacture of rotary fillers and automatic piston operated filling machines and various kinds of other pharmaceutical machines. During the course of assessment proceedings for the relevant assessment year, the ITO noticed that the assessee had made a claim of Rs. 1,76,853 on account of commission payable to one B. A. R. Chandran at three per cent on completion of sales of Rs. 56,40,600, for which orders had been obtained by him but the supplies were not made by the assessee during the relevant previous year. He also noticed that in its books of account, for this payment, the assessee had accounted for only Rs. 32,995.50 and the balance claim of Rs. 1,42,908 had been made only in the statement of taxable income, forming part of the return of income for the relevant assessment year. The ITO also found that the said commission had not been paid by the assessee to Chandran, that the assessee had in fact terminated the commission agency agreement because Chandran had started a parallel business and that the assessee had also filed a suit against Chandran making certain claims against him. The ITO was of the view that the liability claimed by the assessee in respect of commission payable to Chandran was indeterminate till the proceedings initiated by the assessee and Chandran in the Delhi High Court had concluded. Accordingly, the said claim of Rs. 1,76,853 was disallowed and the amount was added back to the income of the assessee. In the assessee's first appeal to the CIT (A), though the CIT upheld the disallowance on the merits, he restricted it to Rs. 26,310 as only this amount was found to have been debited in the books of account of the assessee. The assessee took the matter in further appeal to the Tribunal. While allowing the assessee's appeal, the Tribunal observed that it was not in dispute that there was an agreement of agency between the assessee and Chandran for long, that the assessee had been paying commission to him, which was being claimed and allowed as a liability by the Revenue, that Chandran had been making his claim for the said commission and this claim had not been denied by the assessee in the suit filed in the Court but only the payment was being deferred till the disposal of the suit. The Revenue's application under S. 256(1) of the said Act has been dismissed by the Tribunal on the ground that its finding is based on facts. Hence the present application.

(3.) MR . Rajendra, learned counsel for the Revenue, has contended before us that the findings recorded by the Tribunal that : (1) a balance of Rs. 1,76,853 remained due from the assessee to Chandran, (2) in the suit the assessee has not denied its liability to pay commission under the agreement to Chandran and (3) the liability has otherwise not been disputed by the assessee, are incorrect and, therefore, the proposed question, being a mixed question of fact and law, a reference should be called for.