R.S. Garg, J.
1. The Income-tax Appellate Tribunal, Ahmedabad Bench 'B', at the instance of the Revenue, has referred the following question for the opinion of this court:
Whether, on the facts and circumstances of the case, the Appellate Tribunal was justified in law in holding that the expenditure of Rs. 12,86,711 in the assessment year 1984-85 and Rs. 13,13,975 in the assessment year 1985-86 incurred on payment of commission on sales cannot be treated as sales promotion expenses, and, therefore, cannot be taken into account while computing the disallowance under Section 37(3A) of the Income-tax Act, 1961
2. The short facts necessary for disposal of the present case are that the assessee is a limited company engaged in manufacture and sale of yarns, etc. In the assessment year 1984-85, the Assessing Officer disallowed Rs. 3,35,000 under Section 37(3A) of the Income-tax Act. The details of the working is given in paragraph 7 of the reference. From the reference, it would clearly appear that major part of the aggregate which was taken for determination of the disallowance was sales commission amounting to Rs. 12,86,711. The submission of the assessee, all through, was that the aforesaid amount should not have been taken into aggregate for computing the disallowance under Section 37(3A) of the Income-tax Act for it was not an expenditure falling within the mischief of sales promotion
3. The Sub-mission did not find favour with the Assessing Officer and as the appeal was allowed, the Revenue took up the matter before the Tribunal. The Commissioner of Income-tax (Appeals) held that the sales commission could not be aggregated for the purpose of working of the disallowance under Section 37(3A). The Tribunal, relying upon the judgment of the Calcutta High Court in the case of CIT v. Bata India Limited : [1993]201ITR884(Cal) , confirmed the findings of the Commissioner of Income-tax (Appeals). The Tribunal held that the sales commission paid to the various agents was normal trade practice and as such, could not be brought within the definition of the sales promotion, as defined under Section 37(3B) of the Income-tax Act.
4. After hearing learned Counsel for the Revenue, we are of the opinion that the sales commission, which is given to various sales representatives or, the dealers, would not come within the definition or mischief of sales promotion, but, would altogether be different because sales promotion is altogether a different connotation for the purposes of the Income-tax Act. In our opinion, the Commissioner of Income-tax (Appeals) was justified in reversing the disallowance and the Tribunal was justified in dismissing the appeal. The question is answered against the interests of the Revenue. The reference stands disposed of. No costs.