COMMISSIONER OF INCOME TAX Vs. BHAGAT BROS.

JUDGEMENT

(1.) IN pursuance to the direction of this Court, the Income -tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short asst. yrs. 1978 -79 and 1979 -80, for the opinion of this Court :

(2.) THE assessee -firm derived income from manufacture and sale of woollen hosiery in India and also in foreign markets. During the accounting period relevant to asst. yrs. 1978 -79 and 1979 -80 under consideration the assessee, inter alia, claimed deduction under s. 35B of the IT Act, 1961 (for short "the Act"), on service charges of Rs. 89,540 and Rs. 13,256, respectively, paid to M/s Handicrafts Handloom Export Corporation (for short "HHEC"). The claim of the assessee was disallowed by the AO on the ground that the assessee could not point out the relevant clause of s. 35B under which the relief claimed could be allowed. On an appeal preferred by the assessee, the AAC, B -Range, Ludhiana, allowed the claim of the assessee. On further appeal by the Revenue, the order of the AAC was confirmed by the Tribunal. In doing so, the Tribunal relied on the decision of the Special Bench in the case of J. Hem Chand & Co. vs. ITO (1982) 1 SOT 150 (Bom)(SB).

(3.) FROM the factual position as noticed above, it is clear that the claim of the assessee has been allowed merely on the basis of decision of the Special Bench in the case of J. Hem Chand & Co. (supra). This is clearly contrary to the law laid down by the apex Court in CIT vs. Stepwell Industries Ltd. Etc. Etc. (1997) 142 CTR (SC) 345 : (1997) 228 ITR 171 (SC) and CIT vs. Hero Cycles (P) Ltd. Etc. Etc. (1997) 142 CTR (SC) 122 : (1997) 228 ITR 463 (SC).