COMMISSIONER OF INCOME TAX Vs. HABIB AND CO

JUDGEMENT

(1.) THE question before us, which has been brought at the instance of the Revenue is as to whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee is entitled to weighted deduction in respect of payment of commission made to local agent of foreign buyers.

(2.) THE assessee is a dealer in leather more particularly in sheep skins both tanned and finished leather. For the assessment year 1978-79, the assessee claimed weighted deduction under Section 35B of the Act in respect of the commission paid to the local agent of foreign buyers of the assessee's goods. That claim was disallowed by the Assessing Officer, but was allowed in an appeal by the Commissioner (Appeals). THE Tribunal has affirmed the order of the Commissioner.

(3.) COUNSEL for the assessee, however, contended that the commission paid does qualify for weighted deduction by placing reliance on the decision of the Kerala High Court in CIT v. Kerala Nut Food Co. [1991] 192 ITR 585, wherein the court had noticed the findings of the Tribunal that the agents concerned in the transaction had obtained information regarding markets outside India and they gave advertisement and publicity to the assessee's goods outside India. It was in that background that the Division Bench of the Kerala High Court held that the services rendered by the agents were such as to enable the assessee to have the benefit of weighted deduction as contemplated under Section 35B of the Act. No such evidence is available on the facts of this case. The agent's commission paid was merely a commission paid to a middleman for the services rendered by him to effect the sale of the assessee's goods to a foreign buyer, who was willing to purchase the same and on whose behalf the local agent acted. The observations of the Supreme Court in Stepwell Industries Ltd.'s case [1997] 228 ITR 171, apply to the facts of this case.