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Issues involved:
1. Interpretation of deduction under sections 80HHC and 80-IB u/s 80-IA(9) of the Income-tax Act, 1961. 2. Disallowance of sales commission for failure to prove recipient as a non-resident. Interpretation of deduction under sections 80HHC and 80-IB u/s 80-IA(9): The appeals by the Revenue challenged the direction of the Commissioner of Income-tax (Appeals) to allow deductions under sections 80HHC and 80-IB on the gross total income separately, contrary to the provision of section 80-IA(9). The Tribunal referred to a Special Bench decision and a Madras High Court case, concluding that the deduction under section 80HHC should be allowed after deducting relief under section 80-IA(9). The Tribunal upheld the application of restrictions from the assessment year 1999-2000 onwards, deciding the issue in favor of the Revenue. Disallowance of sales commission for failure to prove recipient as a non-resident: The Assessing Officer disallowed sales commission paid to a foreign entity, questioning the residency status of the recipient. The Commissioner of Income-tax (Appeals) directed the Assessing Officer to verify if the payment was made outside India and allow the claim if so. The Tribunal upheld this direction, stating that if the payment was made to a non-resident and the income is not taxable in India, section 40(a)(i) would not apply. Consequently, the appeals filed by the Revenue were partly allowed, with the matter remitted for verification. This judgment clarifies the interpretation of deductions under specific sections of the Income-tax Act and emphasizes the importance of proving the residency status of recipients for claiming certain expenses, ensuring compliance with relevant tax provisions.
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