BY THE COURT:

This is a income-tax reference under s. 256(1) of the IT Act, at the instance of the Revenue and the following question has been referred for answer by this Court, which reads as under:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the expenditure incurred by Ganesh Sales Agency, was allowable as a business expenditure incurred by the assessee?"

2. The matter relates to the asst. yr. 1977-78 for which the previous year was Diwali year 1976. The assessee paid Rs. 54,861 as commission to Ganesh Sales Agency whose proprietor was Snit. Pushpa wife of the main partner Shri Jakhu Bhai of the assessee-firm. The ITO called upon the assessee to justify the payment of commission to Ganesh Sales Agency. In the earlier year, the ITO had disallowed part of the commission paid to the said concern under s. 40A(2)(a) and the Tribunal had upheld the finding. The assessee claimed that Snit. Pushpa was actually rendering service to the assessee-firm and the assessee had also paid commission to strangers. The ITO had rightly observed that out of the total commission of Rs. 55,476 claimed as a deduction by the assessee-firm, the