Tribunal Upholds CIT(A) on Disallowances; Allows 80HHC Deduction; Dismisses Revenue Appeal on Non-Resident Tax Deduction.

The Tribunal upheld the CIT(A)'s order on various disallowances, except for the computation of deduction under section 80HHC, which was allowed based on a High Court ruling. The Tribunal dismissed the revenue's appeal on the disallowance under section 40(a)(i) for brokerage and commission paid to non-residents, concluding no tax was deductible under section 195 for services rendered outside India. The cross-objection by the assessee was treated as allowed due to the dismissal of the revenue's appeal, effectively supporting the CIT(A)'s findings.

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Issues:
1. Disallowance under the head subscription.
2. Disallowances under the head lease rent on leased back assets.
3. Transaction of sale and lease back assets as a colorable device.
4. Disallowance of foreign travel expenses.
5. Disallowance under the head employer's contributions to P.F.
6. Depreciation on assets acquired in previous assessment years.
7. Treatment of fencing expenses as revenue expenditure.
8. Addition under the head fencing and eligibility for depreciation.
9. Computation of deduction under section 80HHC.
10. Deduction of commission, brokerage, warehouse expenses, and selling expenses.
11. Disallowance of brokerage, commission, warehousing charges, and selling expenses.

Analysis:
1. The appeal addressed multiple grounds raised by the revenue, including disallowances under subscription and lease rent, which were previously upheld in a similar case for the assessment year 1994-95. The Tribunal upheld the CIT(A)'s order on these grounds, except for one related to the computation of deduction under section 80HHC.

2. Regarding the deduction under section 80HHC, the revenue contested the CIT(A)'s direction to allow the deduction with reference to composite income before the application of Rule 8. The Tribunal referred to a previous order and a High Court decision, ultimately upholding the CIT(A)'s order based on the High Court's ruling.

3. The revenue objected to the deletion of disallowance under section 40(a)(i) concerning brokerage, commission, and other expenses paid to non-residents without tax deduction. The Tribunal examined the obligations under section 195 and relevant circulars. It concluded that no tax was deductible under section 195 for payments to non-residents for services rendered outside India, thus dismissing the revenue's appeal.

4. The Tribunal considered documents showing approval by the RBI for payments to non-resident agents for services outside India. It analyzed circulars clarifying tax obligations for such payments and concluded that no tax was deductible under section 195, supporting the CIT(A)'s decision to dismiss the disallowance under section 40(a)(i).

5. The cross-objection filed by the assessee in support of the CIT(A)'s findings was deemed academic due to upholding the CIT(A)'s order. Consequently, the revenue's appeal was dismissed, and the cross-objection was treated as allowed.

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