COMMISSIONER OF INCOME TAX Vs. DUNLOP INDIA LTD

JUDGEMENT

(1.) The case was originally heard and decided on March 21, 1989. Later on, it was decided to rehear the case because certain relevant facts and law and in particular the latest Supreme Court judgments were not cited in the course of hearing of the case. The judgment and order passed on March 21, 1989, are recalled. The case has been heard de novo. The following four questions of law have been referred to this court by the Tribunal under Section 256(1) of the Income-tax Act, 1961 :

(2.) The assessment years involved in this reference are the assessment years 1972-73 and 1973-74, for which the corresponding period of accounting are the financial years ending on December 31, 1971, and December 31, 1972.

(3.) The Income-tax Officer had disallowed the assessee's claim for weighted deduction under Section 35B on two grounds. The staff engaged by the assessee in the export division performed a variety of functions not all of which were of the prescribed nature, viz., active exploration of export potential. It would be impossible to segregate the expenditure that was relatable only to export development from the routine functions. Secondly, it was pointed out that salaries paid to the export personnel being incurred in India were specifically excluded by Section 35B(1)(b)(iii) from expenditure eligible for relief. The Income-tax Officer allowed the expenditure incurred actually for export promotion as deduction. The Appellate Assistant Commissioner, on appeal, held : " Another point which is also common to both the assessment years relates to the refusal of the Income-tax Officer to grant weighted deduction under Section 35B in respect of the expenditure on emoluments of personnel exclusively employed for the promotion of export. It is stated that there was a separate export promotion department and the expenses claimed duly fulfilled the conditions prescribed in Section 35B(1)(b). I have gone through the details furnished and I find that the appellant was maintaining an exclusive independent export promotion department. The nature of the expenses also shows that they qualified for the weighted deduction under Section 35B(1). I, therefore, allow deductions of Rs. 1,14,215 and Rs. 1,33,279 on this account for the assessment years 1972-73 and 1973-74, respectively ".