CIT Vs. MARBLE EMPORIUM

JUDGEMENT

(1.) THE Income Tax Appellate Tribunal, New Delhi has referred the following question of law under section 256(1) of the Income Tax Act, 1961,( hereinafter ref erred to as 'the Act'), for opinion to this Court. 'Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the sales effected in India to foreign buyers against foreign currency and also received in India should be considered as export sales for the purpose of allowing deduction under section 35B of the Income -Tax Act, 1961?' The Reference relates to assessment years 1977 -78, 1980 -81 to 1983 -84.

(2.) BRIEFLY stated the facts giving rise to the present reference are as follows: The respondent is a firm and its main business is export of marble goods, some of which are manufactured by it while others are acquired from other manufacturers. In the course of its export business certain expenses were incurred by the respondent and weighted deduction under section 35B of the Act was claimed in respect of these expenses. While making the assessments, the Income Tax Officer had found that whereas some sales were by way direct exports, there were other sales which were made by the firm at its counter in Agra to foreigners against foreign currency. In respect of assessment year 1977 -78 the break up of sales was as follows: Sales against foreign currency at the counter of the Show -room Rs. 1,70,882 Sales against foreign currency in respect of direct export: Rs. 6,83,533 Sales in Indian Currency Rs. 35,121 Rs. 8,89,536

(3.) SECTION 35B(1)(b)(iii) of the Act provides that weighted deduction is available in respect of distribution, supply or provision outside India of such goods, services or facilities, not being expenditure incurred in India in connection therewith or expenditure (wherever incurred) on the carriage of such goods to their destination outside India or on the insurance of such goods while in transit. It does not allow weighted deduction in respect of goods sold in India. The Apex Court in the case of CIT v. Stepwell Industries Ltd. : [1997]228ITR171(SC) has held that weighted deduction under section 35(1)(b)(iii) is available only on the expenses incurred on the sales outside India and not within India and the burden is upon the assessee to prove that such expenses have been incurred outside India.