COMMISSIONER OF INCOME TAX Vs. MODI XEROX

JUDGEMENT

(1.) This appeal is under Section 260(A) of the Income Tax Act (hereinafter referred to as the Act ) and directed against the order of the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal ) dated 4 th May, 2007. The assessee is a company which is engaged in the business of manufacture and sale of Xerox machines related items. In the return filed for the assessment year 1997-98, the assessee had shown nil income whereas income under Section 115JA was shown at Rs.2,12,34,285/-. The assessment order was passed under Section 143(3) of the Act with the taxable income at Rs.29,61,56,079/-. While passing the assessment order, the Assessing Officer made several disallowance in respect of various claims raised as detailed in the assessment order. Amongst others, the assessee had claimed deduction on account of exemption under Section 10B of the Act and commission to the tune of 3.27% incurred on the sale of products under Section 37 of the Act. The Assessing officer disallowed the exemption under Section 10B. With regard to the commission on sale of products, the Assessing Officer allowed commission to the tune of 3% as being reasonable under Section 37 of the Act as against the demanded 3.27%. Aggrieved against this order, the assessee preferred appeal to the CIT(A). The CIT(A) disallowed the claim under Section 10B, but allowed the claim of commission of 3.27% under Section 37 of the Act. Consequently, the CIT(A) with regard to expenses towards commission under Section 37 allowed the claim of the assessee, whereas with regard to commission under Section 10B disallowed its claim. Both assessee and the revenue preferred appeals against the order of the CIT(A), which came to be disposed of by the Tribunal vide its order dated 4 th May, 2007. On the issue of commission, the appeal of the Revenue was dismissed thereby upholding the decision of CIT(A) on this ground. On the issue of exemption under Section 10B, the Tribunal while not agreeing with the AO and the CIT(A) held the assessee to be entitled to claim deduction under Section 10B of the Act. The Tribunal further remanded the matter back to the Assessing Officer for doing needful and recorded as under:-

(2.) It is against this impugned order on both these counts that the Revenue is in appeal before us.

(3.) With regard to the decision of the authorities below on various other claims and allowances of the assessee, it was an accepted position that those stood covered by a judgment of the Allahabad High Court in ITAs No.30/2001 and 31/2001. Therefore, the appeal was admitted only on the aforesaid two grounds, which are as under:-