MUTHIAH S Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question which has been referred to this court under s. 256(1) of the I.T. Act run as follows:

(2.) THE assessee is a partner in a firm known as Chitra Palayacat Co., Penang, which is a non-resident firm and which carries on business in Malaysia. It does not have a branch in India. For the assessment year 1970-71, the assessee admitted an income of Rs. 8,845 from the said firm and claimed a deduction of Rs. 19,313 as allowable expenditure under s. 35B of the Act. By his order dated July 5, 1971, the ITO determined the taxable income at Rs 17,880 accepting the aforesaid claim of the assessee.

(3.) SECTION 35B provides what is known as export markets development allowance. Where an assessee being a domestic company of a person other than a company who is resident in India has incurred, whether directly or in association with any other person, any expenditure, not being capital expenditure or personal expenses, he shall, subject to the provisions of s. 35B, be allowed a deduction of a sum equal to one and one-third times the amount of such expenditure incurred during the previous year. In the case of companies a larger relief was allowable, namely, one and a half times the actual expenditure incurred. Clause (b) of s. 35B of the Act describes the categories of expenses which were to be taken into account in this connection. The categories of expenses are: