COMMISSIONER OF INCOME-TAX Vs. NAGESH KNITWEARS

JUDGEMENT

(1.) Following question of law, for the asst. yr. 1979-80, has been referred for opinion by the Income-tax Appellate Tribunal, Chandigarh Bench (for short, 'the Tribunal') :

(2.) The assessee exported hosiery goods. The assessee paid commission, service charges and subscription to various agencies. Deductions under s. 35b of the IT Act, 1961 (for short, 'the Act'), were claimed on such payment. The AO noticed that the sums of Rs. 25,846 and Rs. 16,750 had been paid to Wool and Woollen Export Promotion Council (WWEPC) @ one-fourth per cent on the export sales. These were contributions by the assessee to the WWEPC as its member, following a decision taken at the meeting of the council on 14th May, 1979. Similarly, a sum of Rs. 10,952 was paid by the assessee to Handicrafts and Handloom Export Corporation (HHEC) @ 1 per cent on the export sales. Another sum of Rs. 1,850 was paid to Hosiery Exporters Association, Ludhiana (HEA ). The AO took the view that the aforesaid payments were in the nature of contribution or subscription to various agencies and did not qualify for deduction under s. 35b of the Act. The AO noticed that these expenditures were not incurred by the assessee wholly and exclusively for purposes of development of the export market under any of the sub-clause of cl. (b) of s. 35b (1) of the Act. The AO observed, after considering various sub-clauses, that there was no evidence on record to show that the payments were made wholly and exclusively for the purposes specified in the sub-clauses. The AO, therefore, did not allow deduction on the aforesaid payments under s. 35b of the Act. The CIT (A) allowed deduction under s. 35b on the aforesaid payments. The Revenue challenged the order of the CIT before the Tribunal, but failed.

(3.) A similar question has been considered by the Supreme Court in CIT vs. Stepwell Industries Ltd. and Ors. (1997) 228 ITR 171 (SC) : TC S15. 1492.