1. R. C. LAHOTI, J.---This is an application under section 256(2) of the Income Tax Act, 1961, filed by the Revenue seeking a mandamus to the Tribunal stating the case for the opinion of the High Court on the following questions: "(1) Whether the Income-tax Appellate Tribunal was correct in law in allowing the commission of Rs.22,50,000 paid to Giri Raj Fertilizers and Chemicals (Pvt.) Ltd. By holding that it was revenue in nature, allowable under section 37 of the Income-tax Act?
(2) Whether the commission of Rs.46,65,600 paid to Anand Pratyabhut Vit Nigam was allowable in law as held by the Income-tax Appellate Tribunal even in the absence of any material that could prove the rendering of services by such company to the assessee?
(3) Whether the Income-tax Appellate Tribunal was correct in law in allowing the-commission of Rs.46,65,600 paid by the assessee to APVN without discharging the onus of proving that it was incurred wholly and exclusively for the purposes of business?
(4) Whether the Income-tax Appellate Tribunal was correct in law in ignoring the fact that the claim for payments of commission was an arranged affair by the assessee to reduce his tax liability?
(5) Whether the order of the Income-tax Appellate Tribunal is correct on facts and not perverse, in allowing the claim of commission by ignoring certain relevant facts, such as--
(a) The Assessing Officer's findings after collecting necessary information and making enquiries with regard to the assessee's claim of payment of Rs.22,50,000 as not related to business expenditure of the assessee?
(b) The Assessing Officer's conclusion that Anand Pratyabhut Vit Nigam did not file a. Return for income of the assessm ent year 1990-91 and that payment claimed to have been made at Rs.46,65,600 were not verifiable from the assessment, records of the payee company?
(c) Likewise, the enquiries made by the Assessing Officer while examining the claim of the assessee in respect of payments of commission as referred to above and the conclusions drawn have not been taken into consideration?"
2. It is conceded at the Bar that the real controversy is reflected by questions Nos. 1 and 2 and the other questions are merely incidental to the first two.
3. The assessee is an individual doing business in the name and style of Taxcomash Exports. For the relevant previous year, the assessee's source of business income were exports of spare parts to Russia as also commission received from various Indian and foreign authorities. As against his receipt received from commission, the assessee claimed deduction on account of commission paid to Giriraj Fertilizers and Chemicals (P,.) Ltd., (GFC, for short), to the tune of Rs.22,50,000. The genuineness of the payment was not under challenge before the Assessing Officer. The Assessing Officer and the Commission of Income-tax (Appeals) had formed an opinion that the expenditure was of a capital nature. However, the plea of the assessee that GFC had helped the assessee in obtaining a better price and there was a regular memorandum of understanding reached by the assessee with the GFC specifying the terms of understanding and commission was paid in accordance with these terms, prevailed with the Income-tax Appellate Tribunal and was upheld.
4. The Tribunal recorded, the finding of fact that the assessee received repeated orders for supply of detergent for which he earned commission but no amount was paid to GFC on that account. The amount was paid by the assessee only in respect of a contract for 6000 Mt (and not in. Respect of every contract) for supply of detergent goods or commodities to USSR or any other contract though the assessee was receiving repeated order. Both were free to compete with each other in the manner best suited to them. The Tribunal applied the test laid down by a Division Bench of the Madras High Court in Chelpark Company Ltd. v. CIT (1991) 191 ITR 249 and opined that if the expenditure eliminated for good a competitor then it was a capital expenditure but if the expenditure related to warding off competition in individual transaction and leaving the competitor surviving in the filed then it was merely a revenue expenditure. The test which divides an expenditure between capital and revenue is one of enduring benefit.
5. On question No. 2, the relevant facts are that the assessee has received commission for sale of textile machinery imported from USSR against which he made a claim for payment of Rs.46,65,600 to Anand Pratyabhut Vit Nigam Ltd., (APVN for short). It was explained that APVN had introduced the assessee to Prakash Cotton Mills Ltd., which was interested in purchasing textile machinery. On the assessee's persuasion. The said mill purchased the textile machinery from the USSR: The Assessing Officer made inquiries under section 131, but found no such party as APVN at the given address: The assessee also could not produce the said APVN before the Assessing Officer. The Assessing Officer found that there was no written agreement for payment of commission between the assessee and APVN, that APVN was not produced before the Assessing Officer, that the commission paid to APVN was totally disproportionate to the quantum of commission earned by the assessee and that APVN had not filed any returns of its own. For these four reasons, the claim was rejected. The rejection was upheld by the Commissioner of Income-tax (Appeals).
6. However, the Income-tax Appellate Tribunal reversed the findings of the Assessing Officer and the Commissioner of Income-tax (Appeals) by passing a detailed order. A perusal of the order of the Tribunal specially para. 8 thereof reveals a few findings of fact recorded by the Income-tax Appellate Tribunal. There had been exchange of regular correspondence between the assessee and APVN showing the role played by APVN in helping the assessee securing the order. APVN had confirmed the receipt of commission in part and then reminded the assessee for releasing the balance commission. The payments made by the assessee to APVN were all either by account payee cheques or by account payee bankers cheques (pay order). Inquiries made by the Revenue from the UCO Bank, Defence Colony, confirmed these transactions by entries having been made in the accounts of the two. The amount paid to APVN was 18 percent. Of the total commission receipts of the assessee. APVN being an independent entity and very much in existence as it was found to have filed its returns prior to the assessment year in question and its records having been taken into custody `by the police in connection with some investigation, the factum of such payment could not be doubted. It was not the case of the Revenue that the amount paid to APVN had come back to the assessee. The Income-tax Appellate Tribunal also formed an opinion that such being the facts and circumstances, the claim could not have been rejected merely because APVN could not be produced before the Assessing Officer by the assessee and because APVN had not filed its return for the relevant assessm ent year. The Tribunal then came to a finding that the amount of commission paid by the assessee to APVN could not have been back to the income of the assessee. The addition was deleted.
7. The application under section 256(2) of the Income-tax Act is, therefore, rejected.