COMMISSIONER OF INCOME TAX Vs. INDIA CEMENTS LIMITED

JUDGEMENT

(1.) THE question of law referred to us by the Appellate Tribunal for our consideration under Section 256(2) of the Income-tax. Act, 1961, relating" to the assessment year 1976-77 is as under :

(2.) THE assessee is a company carrying on business in manufacture and sale of cement. THE assessee during the course of the assessment proceedings for the assessment year 1976-77, claimed weighted deduction under Section 35B in respect of the expenses paid to the State Trading Corporation of India in respect of the transhipments of a sum of Rs. 54,170. THE Income-tax Officer rejected the claim of the assessee on the ground that the claim of the assessee would fall under Clause (iii) of Section 35B(1)(b) of the Act and the assessee was not entitled to claim the weighted deduction.

(3.) WE have carefully considered the submissions of learned counsel on either side. It is well settled by the decisions of the apex court in the case of CIT v. Stepwell Industries Ltd, [1997] 228 ITR 171 as well as in the case of CIT v. Hero Cycles Pvt. Ltd. [1997] 228 ITR 463 that it is the duty of the assessee to satisfy the authorities that the expenditure claimed falls under any one of the sub-clauses of Section 35B(1)(b) of the Income-tax Act and the assessee has to prove that the expenditure was incurred wholly and exclusively during the previous year for the purposes set out in Clause (b) of Section 35B(1) of the Act. It is no doubt true that on the facts of the case, the Appellate' Tribunal has merely followed an earlier order in the case of Farida Prime Tannery and in that case, the Tribunal has pointed out the wide range of activities undertaken by the State Trading Corporation by way of publicity of the goods to its dealers and the various kinds of services rendered for the promotion of export sale. But, on the facts of the case, the Tribunal has not recorded any finding that the State Trading' Corporation has undertaken any activity outside India either by way of advertisement of the assessee's goods or maintained a branch outside India for the promotion of the sale of the assessee's goods, etc. In the absence of any finding by the Appellate Tribunal, we are of the opinion that the matter should be remitted to the Appellate Tribunal to consider the question, "whether the assessee is entitled to weighted deduction under Section 35B of the Act" ? The admissibility of the expenditure under section 35B of the Act would depend upon the facts of the case. Therefore, the assessee has to prove before the authorities or before the Appellate Tribunal that it is eligible to claim weighted deduction under Section 35B(1) of the Act. The Supreme Court in CIT v. Stepwell Industries Ltd. [1997] 228 ITR 171 in C. A. No. 8790 of 1995 has remitted the matter to the Appellate Tribunal as the Tribunal has not examined the case properly. Following the said judgment of the apex court, we are of the opinion that the matter should go back to the Appellate Tribunal to consider the question afresh. The apex court in CIT v. Hero Cycles Pvt Ltd. [1997] 228 ITR 463 in C. A. No. 3120 of 1995, also remitted the matter to the Appellate Tribunal to consider whether the expenditure incurred by way of commission to the State Trading Corporation was eligible for weighted deduction. The Supreme Court also held that the onus is on the assessee to prove the facts which would enable the assessee to claim weighted deduction and the Tribunal was also directed to examine the facts of the case and find out whether the claim of the assessee is allowable having regard to any of the sub-clauses of Section 35B(1)(b) of the Act. WE are of the opinion that the same procedure should also be adopted in this case as well, as the Tribunal has not recorded any finding whether the State Trading Corporation has rendered any services with reference to the assessee's case for the promotion of export sales of the assessee's goods. Needless to add, the assessee would be entitled to place materials before the Appellate Tribunal to bring its case within any one of the sub-clauses of Section 35B(1)(b) of the Act. In this view of the matter, we answer the question of law referred to us in the negative and in favour of the Revenue, but subject to the above direction given by us that the Appellate Tribunal should consider the case afresh in the light of the two decisions of the Supreme Court cited supra. In the circumstances, there will be no order as to costs.