Judgment :- K.A. THANIKKACHALAM, J. At the instance of the Department, the Tribunal referred the following questions, for the opinion of this court, under section 256(1) of the Income-tax Act, 1961, read with section 18 of the Companies (Profits) Surtax Act, 1964 : "1. Whether the Appellate Tribunal is justified in law in holding that the assessee's appeal before the Commissioner (Appeals) being regarding the merits of the Income-tax Officer's rejection of the assessee's claim which falls within the scope of section 11(1) of the Act, the Commissioner (Appeals) should have disposed of the assessee's appeal dealing with the merits of the assessee's claim, and not with reference to the scope and applicability of section 13 of the Companies (Profits) Surtax Act, 1964 ? 2. Whether, on the facts and the circumstances of the case, the Appellate Tribunal was right in holding that for purpose of computing the chargeable profits under the Companies (Profits) Surtax Act, 1964, the sum of Rs. 24, 437 should be excluded from the total income as arrived at in the income-tax assessment, as representing 'royalty' even though the said sum cannot be treated as 'royalty' within the meaning of section 80MM of the Income-tax Act, 1961 ?" * For the assessment year 1976-77, the assessee in its surtax return had shown the chargeable profits under the First Schedule to the Surtax Act, as Rs. 26, 35, 744. In the assessment order, there was no mention with regard to the assessee's claim for deduction of royalty of Rs. 24, 239. The assessee in its letter dated January 10, 1979, to the Income-tax Officer, stated that the royalty of Rs. 24, 239 was not deducted as claimed by the assessee, while computing the chargeable profits. Accordingly, the assessee requested the Income-tax Officer to issue a revised order, rectifying the above mistake under section 13(1) of the Act. The assessee also sent a reminder on April 3, 1980. The Income-tax Officer sent a reply dated April 3, 1980, enclosing a copy of his revised order dated January 31, 1979. The Income-tax Officer pointed out that the royalty of Rs. 24, 239 was not deducted since the assessee has not obtained approval from the Central Board of Direct Taxes for the agreement for receipt of royalty as per the provisions contained in section 80MM of the Income-tax Act. The Income-tax Officer pointed out that the royalty of Rs. 24, 239 was not deducted since the assessee has not obtained approval from the Central Board of Direct Taxes for the agreement for receipt of royalty as per the provisions contained in section 80MM of the Income-tax Act. Hence, according to the Income-tax Officer, royalty cannot be deducted while computing the chargeable profits, since the assessee has to obtained the approval from the Central Board of Direct Taxes for the agreement for payment of royalty. On appeal, the Commissioner of Income-tax held that there is no mistake in the order to be rectified under section 13(1) of the Act. Accordingly, the appeal by the assessee was dismissed. On further appeal, the Appellate Tribunal following its earlier order in STA No. 13 (MDS) of 1977-78, C-Bench of the Tribunal, order dated May 6, 1978, accepted the assessee's contention and held that the royalty payment of Rs. 24, 239 was deductible as a deduction while computing the chargeable profits of the company.Learned standing counsel appearing for the Department submitted before us that the Tribunal was not correct in permitting deduction of the royalty payment while computing the chargeable profits of the company. Accordingly, learned standing counsel submitted that without the approval from the Central Board of Direct Taxes of the agreement for payment of royalty, deduction cannot be allowed while computing the chargeable profits under rule 1(ix) of the First Schedule to the Companies (Profits) Surtax Act. On the other hand, learned counsel appearing for the assessee, while supporting the order passed by the Tribunal, submitted that the approval of the Board of the agreement for payment of royalty is not necessary for claiming deduction of royalty payment while computing the chargeable profit of the company, as it was prescribed under section 80MM of the Act. It was, therefore, pleaded that there was no infirmity in the order passed by the Tribunal in allowing deduction of the royalty payment under rule 1(ix) of the First Schedule to the Companies (Profits) Surtax Act, 1964. We have heard both learned standing counsel for the Department as well as the assessee. The fact remains that while filing the return for the assessment year under consideration, the assessee claimed deduction of royalty payment amounting to Rs. 24, 239 while computing the chargeable profits of the company. We have heard both learned standing counsel for the Department as well as the assessee. The fact remains that while filing the return for the assessment year under consideration, the assessee claimed deduction of royalty payment amounting to Rs. 24, 239 while computing the chargeable profits of the company. In the original assessment, the Income-tax Officer did not mention anything about this deduction. Thereafter, the assessee wrote a letter seeking deduction of royalty payment as deduction under rule 1(ix) of the First Schedule to the Companies (Profits) Surtax Act, 1964.