LUCAS TVS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee and the Department, the Tribunal referred the following questions for the opinion of this court, for the assessment year 1974-75, under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") By the assessee"1. Whether the Tribunal was right in holding that the relief under section 35B is not available on export inspection agency fee, premium to the Export Credit Guarantee Corporation and export pre-shipment advance interest ?.2. Whether the Tribunal was right in holding that the expenditure incurred for increasing the capital is not in the nature of revenue expenditure ?. 3. Whether the Tribunal was right in holding that the surtax paid is not an allowable deduction ?"By the Department" Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee is a company in which the public are substantially interested within the meaning of section 2(18)(b) ?" *

(2.) IN so far as question No. 1 is concerned, the INcome-tax Officer had disallowed the assessee's claim for weighted deduction under section 35B of the following itemsRs1. Export inspection agency fee 8262. Export Credit and Guarantee Corporation 3153. Export pre-shipment advance interest 16, 511On appeal by the assessee, the Commissioner of INcome-tax (Appeals) held that item No. 1 was an obligatory item in all exports, since without such inspection, the goods could not be exported and that it was hence expenditure on the distribution of the goods within the meaning of the first part of section 35B(1)(b)(iii). Regarding item No. 2, this sum, according to the Commissioner of INcome-tax, was paid by way of premium partly for covering risk during the transit of goods and partly for the Corporation's standing guarantors to the assessee in respect of the goods exported for the purpose of the recovery of the value of the goods.

(3.) THE qualification for deduction under this provision is furnishing of technical information for the promotion of export sales. According to the assessee unless this inspection was done and certificate is obtained, goods cannot be exported to foreign countries. It was submitted that this certificate would furnish the technical information with regard to the goods to be exported to the foreign countries. We agree with the assessee that this item of expenditure is entitled to weighted deduction, since the certificate issued by the export inspection agency would amount to furnishing technical information with regard to the goods to be exported. Even though this was not the case put forward before the Tribunal, inasmuch as this line of argument was advanced before us, we would prefer to accept it on the basis of the decision of the Calcutta High Court cited supraTHE next item in question No. 1 relates to premium paid to the Export Credit and Guarantee Corporation. This sum was paid by way of premium partly for covering risk during the transit of goods and partly for the Corporation standing as guarantors to the assessee in respect of the goods exported for the purpose of recovery of the value of the goods.