COMMISSIONER OF INCOME-TAX Vs. SUBHDIAL KHANNA

JUDGEMENT

(1.) At the instance of the Commissioner of Income-tax, Amritsar, the following question of law has been referred to this court for its opinion by the Income-tax Appellate Tribunal, Amritsar (hereinafter referred to as "the Tribunal"), under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") :

(2.) The facts relevant to the aforesaid question, in short, are : The relevant assessment year is 1978-79, accounting period of which ended on March 31, 1978. The assessee claimed weighted deduction under Section 35B of the Act amounting to Rs. 97,834 in respect of several expenses incurred by him for development of exports. The Income-tax Officer accepted the claim for weighted deduction in respect of commission on exports worth Rs. 37,423.56, foreign travelling expenses amounting to Rs. 16,275 and subscription to silk and rayon export amounting to Rs. 13,778.15 but turned down the claim of the assessee in respect of other expenses. The Income-tax Officer did not allow relief in respect of the following expenses under Section 35B of the Act :

(3.) The assessee, aggrieved against the aforesaid order of the Income-tax Officer, filed an appeal before the Commissioner of Income-tax (Appeals), which was accepted. It was observed by the Commissioner of Income-tax (Appeals) that 92 per cent. of the turnover of the assessee was accounted for by exports. Following the decision of the Special Bench in the case of J. Hemchand and Co., 75 per cent. of the expenditure on salary and bonus to the persons exclusively looking after the exports business was considered to qualify for weighted deduction, while 50 per cent. of the expenditure on salary and bonus paid to other staff members was given the advantage of extra deduction under Section 35B of the Act. Similarly, the Commissioner of Income-tax (Appeals) agreed with the assessee that most of the turnover being exports, the expenditure incurred on stationery and telex shall also qualify for weighted deduction. The Commissioner of Income-tax (Appeals) considered 50 per cent. of the expenditure incurred under these two heads for the purposes of allowing weighted deduction.