COMMISSIONER OF INCOME TAX Vs. KESHRI SINGH

JUDGEMENT

(1.) THESE are two connected references made at the instance of the revenue under Section 256(1) of the Income-tax Act, 1961, by the Income-tax Appellate Tribunal (Delhi Bench " A "). In reference No. 34/69 the following question has been referred to this court for an answer :

(2.) THE board of directors of the company passed a resolution by circulation on September 2, 1959, which directed that the estimate of the capital costs for the construction of the Belpahar and Kerupur plants was Rs. 363 lakhs and was approved by the board of directors of the company in its meeting held on February 12, 1959, when it was also approved that the total issued capital of the company should be Rs. 350 lakhs. It was further narrated in this resolution that, if necessary, a third party should be invited to participate in the capital of the company to the extent of at least of Rs. 100 lakhs and that Messrs. Suraj Kamal Enterprises, Kesar Vilas, Bikaner (hereinafter referred to as "the Firm"), was engaged as brokers for this purpose to negotiate with prospective investors on the understanding that the brokerage calculated at 1 1/2% of the issue price of the shares would be paid to them on the capital obtained through them. It was further mentioned in the aforesaid resolution that the capital to the tune of Rs. 100 lakhs subscribed by the Jaipur family was obtained through the services of the firm. It was proposed that an amount of Rs. 1.50 lakhs, being 1 1/2% of the issue price of the aforesaid shares be paid to the firm. As a matter of fact, the amount of Rs. 1,50,000 was thereafter actually paid by the Tata Company by their cheque dated October 8, 1959, to the firm and the company in turn reimbursed the Tata Company for the same by its cheque dated October 23, 1959.

(3.) THE Commissioner of Income-tax required the Appellate Tribunal to refer the above-mentioned questions of law arising out of its order dated August 29, 1968, to this court for answer and it is in this way that the matter has come before us.