Case: Lachminarayan Madan Lal Vs. Commissioner of Income Tax, West Bengal

No reasons were given in support of that conclusion. The A. A. C. has not examined the evidence before him. He has not considered whether that evidence was believable or not. On the other hand the Tribunal for the reasons it has stated was not able to place reliance on it.10. Mr. Setalvad invited our attention to number of decisions in support of his contention that the Tribunals order is a prima facie perverse order. We shall now consider those decisions.11. In Dhirajlal Girdharilal v Commissioner of Income-tax, Bombay; 26 ITR 736 = (AIR l955 SC : 271) this Court ruled that when a Court of fact acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the Court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises. In this case, we have not been able to accept Mr. Setalvads contention that any part of the evidence relied on by the Tribunal was either irrelevant or inadmissible. Hence this decision has no bearing on the point in issue in this case.12. In Commissioner of Income-tax West Bengal-II v. Rajasthan Mines Ltd., 78 ITR 45 = (AIR 1970 SC 1560 ) this Court held that it is open to the parties to challenge a conclusion of fact drawn by the Tribunal on the ground that it is not supported by any legal evidence or that the impugned conclusion drawn from the relevant facts is not rationally possible. If such a plea is established, the Court has to consider whether the conclusion in question is not perverse and should not therefore, be set aside. It is not possible to say on the facts and in the circumstances of this case that the conclusion of fact drawn by the Tribunal is not supported by any legal evidence or that the same could not be rationally arrived at.13. In Commissioner of Income-tax, Gujarat v. A. Raman and Co., 67 ITR 11 = (AIR 1968 SC 49 ) this Court restated the well accepted proposition that the law does not oblige a trader to make the maximum profit that he can out of his trading transactions. Income which accrues to a trader is taxable in his hands but income which he could have, but has not earned, is not made taxable as income accrued to him. Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A tax payer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality but on the operation of the Income-tax Act. But this Court in the same case further observed that by adopting a device, if it is made to appear that the income which belonged to the assessee had been earned by some other person, that income may be brought to tax in the hands of the assesses.14. According to the findings given by the Tribunal this case belongs to the latter category namely that the assessee by adopting a device has made to appear that the income which belonged to it had been earned by some other person.15. Mr. Setalvad placed considerable reliance on the decision of this Court in Commissioner of Income-tax, Punjab v. Indian Woollen Textile Mills, 51 ITR 291 = (AIR 1964 SC 735 ). Therein this Court observed that in that case the Tribunal assumed the only fact on which its conclusion was founded and had ignored other relevant matters on which A. A. C. had relied in support of its conclusion. Consequently the Tribunal must be held to have misdirected itself in law in arriving at its finding. We have earlier considered the contention of Mr. Setalvad that the Tribunal had misdirected itself but we have not been able to accept the same. Hence the ratio of this decision is of no assistance to the appellant.16. Reference was also made to the decision of this Court in Commissioner of Income-tax West Bengal-II v. Durga Prasad More, 82 ITR 540 = (AIR 1971 SC 2439 ). We fail to see how this decision can lend any assistance to the appellants case. In that case this Court reversing the decision of the High Court held that it could not be said that the finding of the Tribunal as to the unreality of the trust put forward was not based on evidence or was otherwise vitiated.17. In our opinion the facts of this case come within the rule laid down by this Court in Swadeshi Cotton Mills Co. Ltd. v. Commr. of Income-tax, U. P., (1967) 63 ITR 57 (SC).The question whether an amount claimed as an expenditure was laid out or expended wholly and exclusively for the purpose of the business has to be decided on the facts and in the light of the circumstances in each case. The mere existence of an agreement between the assesses and its selling agents or payment of certain amounts as commission assuming there was such payment does not bind the Income-tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessees business. Although there might be such an agreement in existence and the payments might have been made, it is still open to the Income-tax Officer to consider the relevant factors and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under S. 37 of the Act.18. For the reasons mentioned above, we are of opinion that the Tribunal was justified in not stating a case for the opinion of the High Court under Section 256 (1) of the Act and the High Court was justified in not calling for a statement of case under sub-section (2) of Section 256.19

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]14. According to the findings given by the Tribunal this case belongs to the latter category namely that the assessee by adopting a device has made to appear that the income which belonged to it had been earned by some other person.15. Mr. Setalvad placed considerable reliance on the decision of this Court in Commissioner of Income-tax, Punjab v. Indian Woollen Textile Mills, 51 ITR 291   = (AIR 1964 SC 735  ). Therein this Court observed that in that case the Tribunal assumed the only fact on which its conclusion was founded and had ignored other relevant matters on which A. A. C. had relied in support of its conclusion. Consequently the Tribunal must be held to have misdirected itself in law in arriving at its finding. We have earlier considered the contention of Mr. Setalvad that the Tribunal had misdirected itself but we have not been able to accept the same. Hence the ratio of this decision is of no assistance to the appellant.16. Reference was also made to the decision of this Court in Commissioner of Income-tax West Bengal-II v. Durga Prasad More, 82 ITR 540   = (AIR 1971 SC 2439  ). We fail to see how this decision can lend any assistance to the appellants case. In that case this Court reversing the decision of the High Court held that it could not be said that the finding of the Tribunal as to the unreality of the trust put forward was not based on evidence or was otherwise vitiated.17. In our opinion the facts of this case come within the rule laid down by this Court in Swadeshi Cotton Mills Co. Ltd. v. Commr. of Income-tax, U. P., (1967) 63 ITR 57 (SC).The question whether an amount claimed as an expenditure was laid out or expended wholly and exclusively for the purpose of the business has to be decided on the facts and in the light of the circumstances in each case. The mere existence of an agreement between the assesses and its selling agents or payment of certain amounts as commission assuming there was such payment does not bind the Income-tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessees business. Although there might be such an agreement in existence and the payments might have been made, it is still open to the Income-tax Officer to consider the relevant factors and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under S. 37 of the Act.