Y.R. Meena, J. - (1.) In this reference application the following questions are referred for our opinion : "1. Whether, on the facts and in the circumstances of the case, when the Assessing Officer in the assessment allowed relief under Section 35B(l)(b)(iv) of the Income-tax Act, 1961, only on the ground that there have been changes in the said Section from the assessment year 1982-83 without applying his mind to the conditionalities embedded in the Section 35B(l)(b)(iv) of the said Act, the Tribunal was justified in law in holding that the order of the Assessing Officer was not erroneous and prejudicial to the interests of the Revenue and thereby cancelling the order under Section 263 of the said Act passed by the Commissioner ? 2.Whether, on the facts and in the circumstances of the case, when the Assessing Officer while making the disallowance under Section 40A(5) of the Income-tax Act, 1961, in the assessment did not examine whether payments of gratuity excluded in the above computation were, in fact, such gratuities which are exempt under Section 10(10) of the said Act in the hands of the individual employees, the Tribunal was justified in law in holding that the order of the Commissioner of Income-tax on this issue cannot be supported and thereby cancelling the order of the Commissioner under Section 263 of the said Act ?"
(2.) The assessee-company filed its return on July 26, 1982, declaring a total income of Rs. 29,08,030. Subsequently, the return was revised and the assessee-company declared its income at Rs. 30,62,500. During the course of hearing, again, income was revised further and the assessee-company declared its income at Rs. 31,23,300. On a perusal of the assessment order, the Commissioner of Income-tax found that the assessment order of the Assessing Officer was erroneous and prejudicial to the interests of the Revenue so far it relates to allowance of weighted deduction, on payment of commission, under Section 35B of the Act and also not including the gratuity payment for disallowance under Section 40A(5) of the Act.
(3.) On an examination of the assessment records the Commissioner of Income-tax found that the assessee has claimed the weighted deduction on the payment of commission of Rs. 12,94,776 paid to a foreign agent and allowed the weighted deduction on that amount to the extent of Rs. 4,31,592. Similarly, the Commissioner of Income-tax further found while considering the provisions of Section 40A(5), the Inspecting Assistant Commissioner (Assessment), the gratuity payment amount which has been paid to a retired employee had not been included for the purpose of disallowance under Section 40A(5) (sic). The assessment order dated March 10, 1986, was set aside with a direction to make fresh assessment . for disallowance under Section 40A(5) including the gratuity amount paid to the retired employee. Similarly, direction was given to recompute the income as per the provisions of Section 35B after disallowance of weighted deduction on payment of commission.;