ITAT reverses CIT(A) order for AY 2007-08, payment of compensation to sole-selling agent on termination of agreement allowable as revenue expenditure u/s 37(1); Dismisses Revenue’s action of questioning the commercial viability of the payment on the ground that agreement was due to expire in five months from its termination, notes that the agreement was to expire in 16 months and 27 days after the termination, thus cites Revenue’s finding as factually incorrect; Notes the amount of compensation was as per the method prescribed u/s 294A of the Companies Act (dealing with prohibition on payment of compensation to sole selling agents), also notes that the payee (agent) had offered the compensation received from assessee to tax; ITAT observes that assessee was prohibited from dealing in graphic division’s products pursuant to the hive-off of the division and it thus decided to compensate the sole selling agent as per the agreement; On noting that assessee did not contravene the provisions of the IT Act or the Companies Act, holds that Revenue couldn’t question the justification of incurring any expenditure unless it is incurred for the purposes prohibited by the law, relies on Delhi HC ruling in Dalmia Cement (Bharat) Ltd.:ITAT
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