MALHOTRA INTERNATIONAL LTD Vs. INCOME-TAX OFFICER

JUDGEMENT

(1.) The dispute in this appeal relates to the assessees claim for weighted deduction under section 35B of the Income-tax Act, 1961 (the Act). A sum of Rs. 4,06,071 was held to be eligible for weighted deduction. However, the claim for weighted deduction on service charges for export at Rs. 73,758 and the expenditure incurred on carriage of goods abroad at Rs. 3,03,146 were rejected in view of the decision of the Special Bench of the Tribunal in the case of Amar Dye Chem [IT Appeal No. 3643 (Bom.) of 1974-75.. The said conclusion of the ITO has been endorsed by the Commissioner (Appeals) on appeal filed by the assessee. The assessee has consequently come up in second appeals before us.

(2.) We have heard the representatives of the parties at length in this appeal. We very much regret to observe that while deciding the claim of the assessee for weighted deduction under section 35B both the authorities below have referred to then decision of the Special Bench in Amar Dye Chems case (supra) which has nothing to do with the dispute involved in the present case. The correct matter deciding this matter is the Special Bench decision in the case of J. H. Co. v. Second ITO, 1982 1 SOT 150.

(3.) Coming to merits, so far as the first amount of Rs. 73,758 is concerned, according to the assessee this amount was paid on account of commissionto certain agents for procuring foreign orders and getting the sales completed. The Commissioner (Appeals), however, rejected this claim on the ground that these commissions had been paid to Indian parties only and although they may relate to exports they would not qualify for weighted deduction in view of the decision by the Special Bench. The representative of the assessee has contended that after the decision of the Special Bench, the Bombay High Court has already held in Universal Ferro Allied Chemicals Ltd. v. P. G. K. Warrier, 1983 143 ITR 959. that the decision of the Special Bench is not the final authority on the subject and had directed the department to decide the question in the light of the decision of the Bombay High Court in CIT v. Eldee Wire Ropes Ltd., 1978 114 ITR 485. together with such clarification by the Special Bench as was necessary. It, therefore, follows that the Special Bench decision cannot be said to be conclusive on the subject. In any case, the Special Bench decision had not decided that any expenses incurred in India would not be eligible for weighted deduction even though they related to export markets development program. In fact, in clause (vi) of paragraphs 22 it has been mentioned that except for the purpose of sub-clause (3) the place where the expenditure is incurred is irrelevant. In other words, any expenditure specifying the conditions laid down in sub-clause (i) and (iv) to (viii) will get the benefit of weighted deduction irrespective of whether the same was incurred in or outside India. The commission on foreign business was item 14 of the list prepared by the AAC which had been allowed in full by him and the said order was confirmed by the Special Bench. A later judgment of the Bombay Special Bench in G. Co. v. ITO, 1983 3 ITD 566. has already held that commission payment in India cannot be taken as a disqualifying factor and the payment made to third parties who brought the assessee and the foreign buyers together was admissible for weighted deduction (sic.) because it was because of the advertisement and publicity given by those parties that the sale took place. We may specifically refer to para 10 of the order at page 570 of the report. The assessee, is therefore, entitled to succeed in this behalf.