Bombay High Court
Commissioner Of Income-Tax vs Goodlass Nerolac Paints Ltd. on 21 August, 1990
Equivalent citations: [1991]188ITR1(BOM)
Author: Sujata V. Manohar
Bench: Sujata V. Manohar
JUDGMENT T.D. Sugla, J.
1. The Income-tax Appellate Tribunal has referred three questions of law to this court at the instance of the Department under section 256(1) of the Income-tax Act, 1961 (for short "the Act"). The questions read thus :
" (i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amounts of Rs. 96,807 and Rs. 78,805 claimed as deduction for the assessment years 1970-71 and 1971-72, respectively, were not commission paid within the meaning of section 133(4) of the Income-tax Act, and, consequently, the assessee was under no obligation to file the details of those payments?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in stating that the Tribunal was satisfied that the payments of Rs. 96,807 and Rs. 78,805, respectively, for the assessment years 1970-71 and 1971-72 were made wholly and exclusively for the purpose of business when similar payments in the assessee's case for earlier years were disallowed by the Tribunal?
(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 51,451 is a trading loss of the assessee which arose in the previous year relevant to the assessment year 1970-71 and that the same should be allowed?"
2. As regards the first question, it is pertinent to mention that section 133 of the Act empowers the Income-tax Officer and other income-tax authorities to call for information mentioned in the section. Sub-section (4) thereof provides for information as regards payment of commission. Taking the payments in dispute to be commission payments, the Income-tax Officer had asked the assessee to furnish information as required under section 133(4). This was, admittedly, not done. The pertinent question is about the consequences of not furnishing the information as required under section 133(4) and not whether the assessee had or did not have the obligation. The Act does not seem to provide that, if information under section 133(4) is not furnished, the claim for deduction can be disallowed on that ground. The relevant provision in the Act is section 272A(2)(a) which provides that, in case a person, without reasonable cause or excuse, fails to furnish information as required under section 133, he shall be liable to pay, by way of penalty, a sum which may extend to ten rupees for every day during which the failure continues.
3. The consequence of non-compliance with the provisions of section 133, thus is the liability to pay penalty and not the disallowance of the claim for deduction on that ground. In that circumstances, so far as the question of disallowance is concerned, it is really not relevant whether the payments herein were commission payments so that section 133(4) was applicable or whether the payments were of some other nature Non-furnishing of information under section 133(4) can, at its worst, be a circumstance in the matter of considering the question of allowability of the claim for deduction. Therefore, the first question need not be answered.
4. As regards the second question, Shri Jetley, learned counsel for the Department, stated that this question is covered by our court's decision in the assessee's own case reported in Goodlass Nerolac Paints Ltd. v. CIT [1982] 137 ITR 58. Shri Mehta, learned counsel for the assessee, on the other hand, stated that the said decision, in fact, supported the assessee's claim rather than that of the Department. In this context, he strongly relied in our court's observations at pages 62-63 of the report which are as under :
"It was for the Tribunal to decide, as the final judge of facts, as to whether the case of the assessee that these amounts were actually paid by way of secret commissions, should be believed or not, in the absence of the names and addresses of the persons to whom secret commissions were alleged to have been paid. In the present case, the Tribunal has disbelieved this claim of the assessee and we do not see why we should interfere or how we can interfere with that conclusion...."
5. It cannot, perhaps, be disputed that, in order to be entitled to deduction of payments to persons whose names are not disclosed, the assessee has to establish the practice prevailing in that line of business for making such payments, it has to adduce satisfactory evidence to establish the payments, and has also to satisfy the authorities that the payments were made for the purpose of business. no doubt, for the earlier year, the matter came up before this court. The Tribunal had come to the conclusion that the assessee had not proved the payments by way of secret commission and as such was not entitled to deduction. This being a finding of act, our court declined to interfere as the view taken by the Tribunal was a possible view.
6. In the present case, the Tribunal, it appears, had to consider some new facts and aspects of the matter. It found that the assessee was carrying on business in the line in which payments were made to the employees of the customers to keep them on the right side and to ensure the flow of orders, quick payment and smooth running of business in all respects, including quick payment of bills. The Tribunal also found that the assessee was maintaining proper accounts and records regarding these payments in that the payments were made under the instructions and directions of the top executives of the company and were approved by the board of directors at the end of every month. According to the Tribunal, the facts that the assessee was a public limited company, that he accounts were not merely audited but were also placed before the general body of the shareholders, that the assessee's turnover was increasing year after year and that such payments claimed as deduction had dropped from 1.34% for one of the years of 0.22% in the year in question, were very relevant. On the basis of these and other evidence, the Tribunal concluded that the fact of payment of commission was established even though the names and addresses of the recipients were not given and that the payments were made for the purpose of business.
7. As observed by our High Court in the assessee's own case for the earlier year, it was perfectly open to the Tribunal to accept or not to accept the assessee's claim for payment. It was for the Tribunal to decide as a final judge of facts as to whether the case of the assessee that the amounts claimed to have been paid were actually paid should or should not be accepted in the absence of the names and addresses of the persons to whom the amounts were paid. Having then regard to the material referred to and relied upon by the Tribunal for coming to the conclusion in favour of the allowability of the claim for deduction, we decline to interfere, as the conclusion of the Tribunal is a finding of fact and is based on cogent material.
8. Before parting with this question, we consider it desirable to mention that the Income-tax Appellate Tribunal is a final judge of facts. The High Court, in reference, does not interfere with the findings of fact unless such a finding is perverse or is such that no reasonable person can come to such a finding. This will be so even when the High Court feels that it would have come to a different conclusion, if it was sitting in appeal. In that sense, when the High Court declines to interfere with a finding of fact given by the Tribunal in an earlier year, it may not mean that the High Court had approved of such a finding. This, however, does not mean that a subsequent Bench of the Tribunal should come to a conclusion totally contradictory to the conclusion reached by the earlier Bench of the Tribunal in the same case for an earlier year on a similar set of facts. Such a thing may not in the larger public interest as it is likely to shake the confidence of the public in the system. It is, therefore, desirable that in case a subsequent Bench of the Tribunal is of the view that the finding given by the Tribunal in an earlier year requires reappraisal either because the appreciation, in its view, was not quite correct or inequitable or some new facts have come to light justifying reappraisal or reappreciation of the evidence on record, it should have the matter placed before the President of the Tribunal so that the case can be referred to a larger Bench of the Tribunal for adjudication and for which there is a provision in the Income-tax Act.
9. The second question is, accordingly, answered in the affirmative and in favour of the assessee.
10. As regards the third question, the relevant facts are that the assessee had sent some of its goods for sale to Karachi through its managing agent, Forbes Forbes Campbell and Co. On the realisation of the sale price, the latter used to deposit the sale proceeds in the bank account of the assessee with the karachi branch of the Chartered Bank. On the partition of the country in 1947, the credit balance to its account in the Chartered Bank, Karachi, was frozen by the Pakistan authorities. It did not permit the same to be remitted to India or to be utilised for any purpose whatsoever. The assessee-company waited for so long and having lost the last ray of hope of recovering a single farthing from the said account, ultimately wrote off the amount in the year under appeal. There cannot be any dispute that the amount lying to the credit of the assessee with the Chartered Bank, Karachi represented sale proceeds of the assessee's stock-in-trade and had become bad. The only question that can possibly arise for consideration is whether the said amount became bad in the year under appeal or in some other earlier year. In our view, when two facts are proved, namely, that the debt is a trade debt and that it has become bad, the court should not interfere with the decision of the assessee in writing off the amount in a particular year unless there is anything patently wrong with the assessee's decision.
11. Accordingly, we answer the third question also in the affirmative and in favour of the assessee.
12. No order as to costs.