1998 (3) TMI 125

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....he said Act, the Tribunal was justified in law in holding that the order of the AO was not erroneous and prejudicial to the interests of the Revenue and thereby cancelling the order under s. 263 of the said Act passed by the CIT? 2. Whether, on the facts and in the circumstances of the case, when the AO while making the disallowance under s. 40A(5) of the IT 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 s. 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 CIT on this issue cannot be supported and thereby cancelling the order of the CIT under s....

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....wance of weighted deduction on payment of commission. In appeal, the Tribunal has considered the decision of the Bombay High Court in CIT vs. Godrej & Boyce Mfg. Co. P. Ltd. (1984) 41 CTR (Bom) 181 : (1984) 149 ITR 594 (Bom) : TC 15R.490, which is in favour of the assessee so far as it relates to the allowance of the weighted deduction on commission paid to a foreign agent. Similarly, following the decision of the Special Bench of the Tribunal, the Tribunal has taken the view that no disallowance was warranted under s. 40A(5) of the Act as gratuity payment cannot be included in the amount for the purpose of disallowance under s. 40A(5). 3. Heard learned counsel for the parties. Learned counsel for the assessee, Dr. Pal, placed reliance o....

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.... to the interests of the Revenue. 6. The next reason for setting aside the assessment order given by the CIT is that the AO has not included the gratuity amount for the purpose of disallowance under s. 40A(5) of the Act. The issue has been considered elaborately by the Bombay High Court in CIT vs. Colgate Palmolive (I) Pvt. Ltd. (1994) 118 CTR (Bom) 212 : (1994) 210 ITR 770 (Bom) : TC 18R.336. At page 782, the High Court observed as under: "Since the payment of a sum of Rs. 90,000 to the chairman-cum-fulltime director as retirement gratuity cannot be looked upon as periodic payment, it is not covered by the provisions of either s. 40(c) or s. 40A(5) of the IT Act, 1961. The ceiling, therefore, which is prescribed under these two secti....