COMMISSIONER OF INCOME TAX Vs. TRIBENI TISSUES LTD

JUDGEMENT

(1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1981-82, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to weighted deduction under Section 35B(1)(b)(iv) of the Income-tax Act, 1961, in allowing relief of Rs. 58,281 to the assessee ?" The facts leading to this reference briefly stated are that the assessee is a company and the assessment year involved is 1981-82. The assessee claimed deduction under Section 35B of the Income-tax Act, 1961 (for brevity "the Act"), on account of travelling expenses and commission paid to foreign agents for securing information about the market conditions prevailing abroad. The reason for rejecting the assessee's claim was that item (ii) of Clause (b) of Sub-section (1) of Section 35B of the Act has been withdrawn with effect from April 1, 1981.

(2.) The assessee carried the matter before the Commissioner of Income-tax (Appeals) and argued that the claim was on account of agency commission paid to selling agents in the U. K. who were appointed as sole agents for sale of the assessee's products abroad. Various other clauses of the agreement also required the foreign agents to accept the orders from foreign customers, transmit such orders to the assessee to deliver the products to the customers. For such various services, the assessee was required to pay commission to the agents and the commission was duly approved by the Reserve Bank of India. It was contended on behalf of the assessee that the claim for weighted deduction falls under sub-clause (ix) of Clause (b) of Sub-section (1) of Section 35B of the Act. Reliance was placed on the decision of the Special Bench of the Tribunal in the case of J. Hemchand. However, the Commissioner of Income-tax (Appeals) confirmed the order of the Assessing Officer.

(3.) Before the Tribunal, the order of the learned Commissioner of Income-tax (Appeals) was objected to and the submissions and arguments advanced before him were reiterated by the assessee's counsel. It was also submitted that an identical claim of the assessee was allowed by the Commissioner of Income-tax (Appeals) in the assessment year 1980-81 which was not disputed by the department. Reliance was also placed on the appellate order of the Tribunal, E-Bench, Calcutta, in the case of Chloride India Ltd. v. IAC (Asst.) Range-I, Calcutta, in I. T. A. No. 742 (Cal) of 1987, dated November 28, 1988, relating to the assessment year 1981-82. It was argued that the issue considered by the Tribunal in the aforesaid order is identical to the present assessee's case. Reliance was also placed on the decisions of various High Courts for the proposition that the commission paid to foreign agents is eligible for weighted deduction under Section 35B of the Act. The Tribunal considered the arguments and submissions made by both the sides. The appeal by the assessee was allowed as it was found that the payment of commission to foreign agents falls under Sub-clause (iv) of Clause (b) of Sub-section (1) of Section 35B of the Act. The order of the learned Commissioner of Income-tax (Appeals) was accordingly reversed.