COMMISSIONER OF INCOME-TAX Vs. KUMAR ENGINEERS

JUDGEMENT

(1.) THE assessee, Kumar Engineers, appointed Kumar and Company, as their sole selling agent. The sole selling agent was to be paid commission at the rate of 6 per cent. on the orders procured by them. For the assessment year 1976-77, the assessee claimed deduction of commission paid to the sole selling agent but the Income-tax Officer disallowed it. He came to the conclusion that two of the partners of the assessee-firm were partners of the firm carrying on the sole selling agency and since no work was done by the sole selling agency, he held that the commission paid was unreasonable.

(2.) ON appeal, the Commissioner of Income-tax (Appeals) came to the conclusion that it was found that one of the partners of the sole selling agency firm had travelled throughout India to collect orders which increased the sales of the assessee and held that 2 per cent. commission was reasonable and disallowed the remaining 4 per cent.

(3.) ON further appeal, the Income-tax Appellate Tribunal, Delhi, further found that two of the partners of the sole selling agency firm were proved to have gone around the country obtaining huge orders for the products of the assessee-firm and keeping in view the higher sales and other relevant factors came to the conclusion that 4 per cent. was reasonable and disallowed only 2 percent. commission.