Section 35B relief required proper application of precedent, and the Gujarat High Court upheld reassessment guidance.

Section 35B(1)(b) of the Income-tax Act, 1961 was not properly applied by the Income-tax Officer, resulting in excessive relief to the assessee. The Commissioner therefore set aside the assessment and required the claim to be reexamined. The Tribunal directed the officer to apply the principles laid down in J. Hemchand and Co., and the Gujarat High Court upheld that approach, leaving the decision in the assessee's favour.

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Issues: Whether the Tribunal was right in directing the Income-tax Officer to apply the tests and principles laid down by the Special Bench of the Tribunal while considering weighted deduction under section 35B of the Income-tax Act, 1961.

Analysis: The direction given by the Tribunal was made with the consent of both parties, who agreed that the claim for weighted deduction in respect of expenditure on staff working in India and commission paid in India should be examined in the light of the Special Bench decision and appropriate relief granted accordingly. The reference question therefore turned on the propriety of the Tribunal's consensual direction rather than on an independent contested determination.

Conclusion: The question was answered in the affirmative and against the Revenue.

Ratio Decidendi: A direction made by the Tribunal with the consent of both parties, requiring reconsideration of a deduction claim in accordance with an identified legal test, warrants an affirmative answer in reference proceedings.

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