Judgment

KHANNA, J. :- This appeal on certificate granted by the Allahabad High Court is directed against the judgment of that Court whereby it answered the following two questions referred to it under Section 66 (1) of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act) against the appellant and in favour of revenue :

"1) Whether on the facts and on a true and proper interpretation of the agreement dated 31-7-1956, between the British India Corporation and the appellant company, the letters of Sri Kailash Nath Agarwal, the letters of Managing directors, the sum of Rupees 43,333/- retained by the British India Corporation and adjusted by it to the credit of Sharma & Co. was the assessable income of the appellant company?

2) Whether on the facts and circumstances of the case, the sum of Rs. 43,333/- represented an expenditure under Section 10 ?"

2. The matter relates to the assessment year 1956-57. The appellant is a private limited company and Kailash Nath Agarwal is one of its directors. As per agreement dated July 31, 1956 the appellant was appointed with effect from April 1, 1955 the sole selling agent of the Kanpur Cotton Mills for the sale of yarn and cloth manufa