COMMISSIONER OF INCOME TAX Vs. RAMDAS RAMLAL

JUDGEMENT

(1.) AS directed by this court by order dated October 30, 1980, in Misc. Civil Case No. 65 of 1977, the Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following question of law for the opinion of this court:

(2.) THE material facts giving rise to this reference as set out in the statement of case are as follows : THE assessee, a registered firm, derived income mainly from wholesale business in cloth at Indore City and from sales outside Indore, In the assessment year 1970-71 the assessee-firm had two partners, Ramlal and Madanmohan. Ramlal's share in the firm was 50% and that of Madanmohan was 25% in profits only. Rajiv, a minor grandson of Ramlal, was admitted to the benefits of the partnership to the extent of 25%. Ramlal died on November 21, 1969. On his death the firm was reconstituted and Ramlal's widow, Smt. Krishnavanti, and his daughter, Smt. Shila Sethi, were made partners of the firm having 25% share each in the firm. Madanmohan remained the sole working partner of the firm. In the assessment year in question the assessee claimed a deduction of the sum of Rs. 22,398 paid to Vinay Bhasin, son of Madanmohan, as commission. Vinay Bhasin, was constituted as agent for the entire previous year relevant to the assessment year 1972-73 by an agreement dated April 1, 1971.

(3.) THUS, if the burden to prove the fact that the payment of the amount to Vinay Bhasin was wholly and exclusively for business purposes of the assessee was on the assessee, it cannot seriously be contended that the burden to prove the genuineness of the agreement upon which reliance was placed by the assessee to prove that the payment of commission was wholly and exclusively for business purposes of the assessee did not He on the assessee. The Tribunal, therefore, did not commit any error of law in holding that the burden to prove the genuineness of the agency agreement in pursuance of which payment was made to Vinay Bhasin in the assessment year 1972-73 was on the assessee.