ORDER
1. M/s. Ossoor Estates Limited is before us raising the following questions of law:
(1) Whether on the facts and in the circumstances of the case, the respondent is justified in law to revise the well considered order of the Appellate Authority (Joint Commissioner) exercising his powers of revision under Section 55 of the K.A.I.T Act, 1957?
(2) Whether on the facts and in the circumstances of the case, the respondent is justified in upholding the order of disallowance of commission of Rs. 3,33,389/- paid to the Directors of the petitioner-company?
(3) Whether on the facts and in the circumstances of the case, the respondent is justified in disallowing the rebate on donation of Rs. 59,690 ?
2. The assessment year involved is 1996-97. The Director’s commission of Rs. 3,33,389/- was paid to seven directors of the petitioner-company. It was claimed as a deduction while computing taxable income by the assessing authority. The same was not allowed and appeal was filed. In appeal, assessee got the relief with regard to deduction. Thereafter revision proceedings were initiated under Section 35 of the Karnataka Agricultural Income Tax Act, 1957 by the revising authority. Notice was issued. Reply was obtained. After hearing, an adverse order was passed by the revising authority. The revising authority set aside the order of first appellate authority and restored the order of assessing authority. It is in these circumstances, assessee is before us.
3. Sri Ramabhadran, learned counsel invites our attention on the material on record to say that revising authority was wrong in restoring the order of assessing authority. According to him, there was no prejudicial interest that has arisen on account of the order of first appellate authority. Even otherwise, he would say that payment of 2% commission to all the seven Directors could not be termed as excess or unreasonable in the given circumstances. He would also say that assessee is engaged solely in agricultural operations and payment of commission to seven Directors cannot be said to be outside agricultural operations. Therefore, learned Counsel wants interference.
4. Per contra, Smt Sujatha, learned AGA would say that findings of the revising authority are acceptable in law. She would say that Directors have been made over the commission which is not referable to agricultural income in terms of Section 5(1)(k) of the Karnataka Agricultural Income Tax, 1957. She supports the order.
5. Alter hearing, we have carefully perused the material on record.
6. From the material on record, we see that an adverse order was passed against the assessee. Thereafter, the said matter was taken up by way of an appeal to the Joint Commissioner of Commercial Taxes (Appeals). The Commissioner, after noticing the payment of 2% commission to seven directors, has chosen to say that said payment cannot be said to be excessive, unreasonable and is not opposed to Section 5(1)(k) of the Karnataka Agricultural Income Tax Act, 1957 (for short ‘the Act’). The Joint Commissioner accepted the case of an assessee.
7. The revising authority noticing the order passed by the Joint Commissioner, has chosen to issue a revision notice on 11-12-2002. In the notice, revising authority would say that claim of Director’s commission to the tune of Rs. 3,33,389/- and rebate on donation of Rs. 59,690/- are inapplicable in law. The grant of relief in respect of these two items by the appellate Commissioner according to revising authority is erroneous and requires exercise of revisional powers under Section 35 of the Act. He would also rely on a judgment of this Court reported in 1998 (45) KLJ 129B [Palanjee Estate, Chettalli Post, Kodagu District v. Addl.(Commissioner of Commercial Taxes, Mysore Zone, Mysore and Ors.). The assessee has chosen to give a detailed reply and in the reply, assessee would say that there exists no ground for revision in the given circumstances. The assessee would also say that even otherwise, Directors are entitled to 2% commission in the light of Companies Act and in the given circumstances. The revising authority, thereafter, after hearing, has chosen to set aside the order of first appellate authority in the impugned order.
8. Let us see as to whether revision order is sustainable or not. The appeal order is being revised by the revising authority. The appellate Commissioner notices that assessee is a public limited company having no managing director and therefore, routine affairs of the company like agricultural operations, financial control and over all administration are taken care under the guidance of Directors of the company. He would also notice that Section 309 of the Act provides for 3% commission and in the case on hand, Directors are paid only 2% commission. Noticing these aspects of the matter, he was of the view that 2% Director’s commission cannot be said to be excessive or unreasonable under Section 5(1)(k) of the Act. The revising authority while revising, has chosen to say that company has not established as to what type of work concerning deriving of agricultural income was entrusted to said Directors to whom said commission is paid. In our view, findings of the revising authority cannot be accepted in the given circumstances and on facts of the case. Admittedly, assessee is a public limited company. Admittedly, assessee carries only agricultural operations and not other operations. There is no managing director. The Companies Act provides 3% commission to the Directors in such cases. Whereas in the case on hand, assessee has chosen to take 2% commission that too, for all directors put together. Taking into consideration all these aspects of the matter, in our view, first appellate authority was justified in holding that said claim is neither excessive nor unreasonable in the case on hand. We must also notice that such commission was provided to Directors for several long years. We are inclined to accept findings of the Commissioner in the case on hand. In the circumstances, we are unable to accept findings of the revising authority that the said order is prejudicial to the interest of the revenue. In the absence of any prejudicial interest in terms of Section 35 of the Act, revising authority could not have considered the matter by exercising Section 35 of the Act The revising authority has chosen to rely on the judgment of this Court reported in 1998 (45) KLJ 129B. That judgment deals with power of revision. There can be no quarrel over this proposition. In the circumstances, both on law and on facts, we are in agreement with the submissions made by learned Counsel for the petitioner in the case on hand.
9. There is one other issue that requires consideration by us. It is seen that assessing authority disallowed its claim of rebate on donation for Rs.59,690/-. Thereafter, assessee has sought for rectification of the same and same was considered in his favour in terms of the order dated 12-2-1999. That order becomes final. The Commissioner has chosen to notice the same and the same was considered in para 6 of the order. Further, in the operative portion, he has chosen to uphold disllowance despite the order dated 12-2-1999. In the light of the order dated 12-2-1999 Joint Commissioner could not have disallowed as has been done at page 25. Disallowance is only a mistake that has occurred in the case on hand. The revising authority without noticing the order dated 12-2-1999 has chosen to accept disallowance also in the case on hand. Such disallowance is impermissible in the light of the order dated 12-2-1999. In these circumstances, we accept this petition. Questions of law are answered in favour of the assessee and against the revenue. Ordered accordingly. No costs.