COMMISSIONER OF INCOME TAX Vs. TWINKLERS

JUDGEMENT

(1.) THESE three references under Section 256(1) of the Income -tax Act, 1961, made at the instance of the Revenue raise the following common question of law arising out of the assessment years 1972 -73, 1973 -74, 1974 -75 :

(2.) FROM the statement of facts it is disclosed that the assessed had incurred expenses on packing and forwarding. The assessed had also incurred expenses on import license fee. The assessed claimed entitlement for weighted deduction in respect of the said expenses which was disallowed by the Assessing Officer. The assessed preferred appeals to the Appellate Assistant Commissioner with whom the plea of the assessed prevailed and the assessed was held entitled to weighted deduction on both the counts. The Revenue preferred an appeal to the Income -tax Appellate Tribunal which has been dismissed.

(3.) IN CIT v. Step well Industries : [1997]228ITR171(SC) , interpreting Section 35B of the Act, their Lordships have held that the expenses should have been incurred outside India and the onus of proving such entitlement is on the assessee. A bare reading of Sub -clause (viii) of Section (1)(b) of Section 35B shows that the expenditure should have been incurred wholly and exclusively on performance of services outside India and should have been in connection with or incidental to the execution of any contract for the supply outside India of such goods, services or facilities. Packing and forwarding expenses were obviously incurred within the country before exporting the goods. So also the expenses on import license fee cannot be said to have been incurred outside India. None of the expenses is relatable to the performance of services outside India. The Tribunal was not, thereforee, in our opinion, justified, in taking the view which it did. We are also fortified in our opinion by a Division Bench decision of the Punjab and Haryana High Court in Vijay Kumar Aggarwal v. CIT .