KHAMBHATWALA M M Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, a registered partnership firm, carries on the business of manufacturing hair oils and perfumes. It also exports large quantities of hair oils outside India. In the year of account relevant to the asst. year 1974 75, it incurred an expenditure of Rs. 69,228 for carriage and insurance of the goods exported. In the year of account relevant to the asst. year 1975 76, it incurred an expenditure of Rs. 1,17,959 for carriage and insurance of the goods exported. In the year of account relevant to the asst. year 1976 77, it incurred an expenditure of Rs. 10,301 for insurance and Rs. 58,375 for the carriage of the goods which were exported. The assessee, in the course of the assessment for each of the three assessment years, did not claim weighted deduction in respect of the said expenditure under S. 35B of the IT Act, 1961 ("the Act"for short). Therefore, the question of allowing weighted deduction under S. 35B did not arise before the ITO. In the appeals before the AAC, however, the assessee pressed the above claims. The AAC, for the reasons recorded in his order, allowed the claims. The Revenue, being aggrieved by the decision of the AAC, preferred appeals before the Tribunal. The Tribunal, by its common order for the asst. yrs. 1974 75, 1975 76 and 1976 77, held that the assessee's claims for weighted deduction in respect of freight and insurance charges under S. 35B were not allowable. In the result, it set aside the decision of the AAC in respect of the said claims made by the assessee. In the background of the above facts, the following two questions have been referred to us for our opinion under S. 256(1) of the Act, at the instance of the assessee :

(2.) THE question which arises for our consideration is whether the assessee is entitled to claim deduction as provided in S. 35B(1) of the Act. Sec. 35B(1) provides for export markets development allowance. Clause (a) of S. 35B(1) enacts that, if any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) referred to in cl. (b) has been incurred by an assessee, he shall, subject to the provisions of this section, be allowed a deduction of a sum equal to one and one third times the amount of such expenditure incurred during the previous year. Clause (b)(iii) of S. 35B(1) reads as follows :

(3.) LEARNED counsel for the assessee relied upon the observations in Aiyar's IT Act, 2nd Edition, p. 544. This does support learned counsel, but for the reasons already stated by us, we are unable to agree with the meaning of the section as given in this book."