@JUDGMENTTAG-ORDER
K. Raviraja Pandian, J.
The question referred to us, at the instance of the revenue, for our consideration is, ""whether on the facts and in the circumstances of the case, the
Appellate Tribunal was right in holding that expenditure of Rs. 3,12,735 being the sales commission could not be subjected for disallowance u/s
37(3A) of the Income Tax Act, 1961. The assessment year is 1984-85"".
2. The assessee is a company. During the assessment year 1984-85, a sum of Rs. 3,12,735 being sales commission paid by the assessee was
claimed as an expenditure allowable u/s 37(1) of the Act and the same was fully allowed by the assessing officer. The Commissioner acting u/s
263, directed the assessing officer to allow that expenditure in accordance with section 37(3A) of the Act. The Tribunal upheld the validity of the
Commissioner''s order but held that the provisions of section 37(3A) are not applicable to the expenditure claimed by the assessee. Hence the
present reference at the instance of the revenue.
3. Question similar to the one referred above has already been considered by this court in the case of Commissioner of Income Tax Vs. Karnal
Co-operative Sugar Mills Ltd., and answered in favour of the assessee. The court therein held that the commission paid to the persons who
effected the actual sale, at a percentage of the value of the product and the salary paid to employees such as marketing officers and sale personnel
and persons manning the sales offices are obviously expenditure incurred for effecting normal sales, and do not amount to special sales promotion
expenses. By and large, sales promotion expenses are expenses which are not directly related to any single sale, but are expenses aimed at
generating interest among potential customers for the purchase of the product. Commission, on the other hand, is paid on the actual sales effected
to the person through whose assistance the sale was concluded. The reason given in that decision is squarely applicable to the facts of the present
case. We, therefore, answer the question referred to us in favour of the assessee and against the revenue.