COMMISSIONER OF INCOME TAX Vs. GIRDHARLAL VITHALDAS

JUDGEMENT

(1.) THE assessee is a registered partnership firm carrying on business of manufacture of isabgol, etc. It also carries on business in jeera, cola and other articles and as general merchant. The assessee also exported isabgol. In the year of account relevant to the asst. year 1977 78, the assessee had incurred expenditure of Rs. 5,744 by way of commission paid to D. Abraham and Sons (P.) Ltd. and Rs. 1,05,691 by way of interest paid to the bank in packing credit account. It claimed export markets development allowance or, in other words, weighted deduction in respect of the said expenditure and other expenditure with which we are not concerned in this reference under S. 35B of the IT Act, 1961 ("the Act" for short). The ITO disallowed the claim made by the assessee and his decision was confirmed by the CIT (Appeals) ("the CIT" for short), in the appeal. However, the Tribunal ("the Tribunal" for short), following decision of its Special Bench in the case of J. Hemchand and Co., 1 SCT 150, allowed the claim of the assessee to the extent of 75 per cent of the expenditure of Rs. 5,744 by way of commission paid to D. Abraham and Sons (P) Ltd. and in full so far as packing credit interest was concerned. It is in the background of the above facts that the following two questions have been referred to us for our opinion :

(2.) SO far as the second question is concerned, it is directly covered by our decision in I. T. R. No. 337 of 1984 [CIT vs. Jay Industries (1992) 104 CTR (Guj) 196 : (1992) 196 ITR 313 (Guj)] disposed of by our judgment delivered today. Following the said decision and for the reasons recorded therein, question No. 2 shall have to be answered in the negative and against the assessee. So far as the first question is concerned, it appears that the assessee had paid an amount of Rs. 5,744 to D. Abraham and Sons (P.) Ltd., clearing agent at Bombay. As pointed out above, the Tribunal has allowed the assessee's claim for weighted deduction in respect of the said expenditure to the extent of 75 per cent This expenditure which the assessee had incurred is in connection with the export or supply of goods outside India but it is incurred in India. This expenditure does not qualify for weighted deduction under sub cl. (iii) of S. 35B(1)(b). The said sub clause provides that expenditure incurred in India in connection with the supply of goods outside India does not qualify for weighted deduction. Therefore, in our opinion, no part of this expenditure could have been considered for weighted deduction. The Tribunal was, therefore, wrong in allowing the assessee's claim for weighted deduction to the extent of 75 per cent of the said expenditure. Question No. 1 also shall have to be answered in the negative and against the assessee. Reference answered accordingly with no order as to costs.