THE COMMNER OF INCOME TAX AP HYD V. M/S SOUTHERN AID PLANTS LTD SECBAD

ITTA/59/2001

AI Insights

The case involves an appeal by the Revenue against an order by the Income Tax Appellate Tribunal, Hyderabad, which pertained to the assessment year 1991-1992. The core issue was whether a secret commission of Rs.1,43,257 paid to government employees was deductible under Section 37(1) of the Income Tax Act, 1961. The Revenue argued that any payment to a government servant prohibited by law cannot be allowed as expenditure, referencing a precedent from the High Court. The assessee contended that the amount cited included sales promotion expenses, which were allowable, and that only the portion related to commissions paid to government employees should be disallowed. The court modified the question to focus specifically on the deductibility of the secret commission paid to government employees and ruled in favor of the Revenue.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 744018 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 03-12-2013
• Assessment Year: misc
• Other Referred Cases: XL Telecom Pvt. Ltd., Secunderabad Vs. Commissioner of Income Tax, Hyderabad
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Keywords: Deductible; Government employees; Sales promotion expenses; Secret commission
• Section: 37(i); 260-A

Judgement Text

"HON’BLE SRI JUSTICE G. CHANDRAIAH AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. No. 59 OF 2001 ORDER:- (per Hon’ble Sri Justice Challa Kodanda Ram) This appeal is preferred by the Revenue, against the order dated 29.09.2000 in I.T.A. No.219/Hyd/95 passed by the Income Tax Appellate Tribunal, Hyderabad Bench “B” (in short “the Tribunal”). The present case is pertaining to the assessment year 1991-1992. 2) This appeal is filed at the instance of the Revenue raising the following question of law under Section 260(A) of the Income Tax Act, 1961 (in short “the Act”). “Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the secret commission Rs.1,43,257/- paid to the Govt. Employees is deductible U/s 37(I) of the Income Tax Act?” 3) At the time of hearing, the learned counsel for the Revenue Sri S. Seshidhar Reddy, by placing reliance on the judgment of this Court reported in XL Telecom Pvt. Ltd., Secunderabad Vs. Commissioner of Income Tax, Hyderabad[1], would submit that any amount paid to a Government servant, which is prohibited by law cannot be allowed as expenditure. This legal proposition was not disputed by the learned counsel for the assessee. In the light of the statutory law as well as the binding precedent, the question needs to be answered in favour of the revenue and against the assessee. 4) However, the learned counsel for the assessee would point out that there is a figure of Rs.1,43,257/-, which has been mentioned as commissions paid to the Government employees is not correct. In fact, the said figure of Rs.1,43,257/- are sales promotion expenses, which were in fact allowed by the appellate commissioner himself. The dispute before the Tribunal was relating to Rs.1,41,020/-, which includes the commissions paid to the individuals apart from the amounts paid to the Government employees. In that view of the matter, the learned counsel would submit that the Assessing Officer has to determine the amounts that were paid to Government employees and only to that extent the disallowance can be made. 5) Inasmuch as, there is no such bifurcation which has been made by the Assessing Officer, it is but just to leave that issue to be determined by the authorities while passing the consequential orders. We also make it clear that in the light of the question which has been raised, we feel it appropriate to modify the question as follows: “Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the secret commission paid to the Government employees is not deductible under Section 37(1) of the Income Tax Act?” 6) In the light of the discussion above, the modified question of law is answered in favour of the revenue and against the assessee. 7) Accordingly, the appeal is disposed of in terms of this order. No order as to costs. Miscellaneous Petitions, if any, pending in this appeal shall stand disposed of. ____________________ G. CHANDRAIAH,J ____________________________ CHALLA KODANDA RAM, J Date:03.12.2013. SSV HON’BLE SRI JUSTICE G. CHANDRAIAH AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM ITTA No.59 OF 2001 Date:03.12.2013. SSV [1] ITTA No.38 of 2001 "