ARAVINDA PARAMILA WORKS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The question in this appeal is whether payment of commission to an agent abroad is no maintenance of an agency within the meaning of Section 35-B(1)(b)(iv) of the Income-tax Act, 1961. The High Courts have taken divergent views.

(2.) We are concerned with the Assessment Year 1981-82. The assessee manufactured agarbathis. It had exported agarbathis during the year under consideration. It had paid commission to agents outside India who had procured orders. It claimed weighted deduction under the aforementioned provision in respect of such expenditure of Rs. 13,23,225/-. It was disallowed by the Assessing Authority. The Commissioner of Income-tax (Appeals) took a contrary view. The Income-tax Appellate Tribunal held that the Commissioner (Appeals) was not justified in allowing the said weighted deduction. From out of the judgment and order of the Tribunal, the following question was referred to the High Court for its considerations:

(3.) Section 35-B states that where an assessee, who is resident in India, has incurred, directly or in association with any other person, any expenditure referred to in clause (b) thereof, he would be allowed a deduction of a sum equal to be one and one-third times the amount of such expenditure incurred during the previous year. So far as is relevant, clause (b) reads: