1986 (11) TMI 11 - HC - Income Tax

Summary

Issues:
Interpretation of section 35B of the Income-tax Act for weighted deduction related to export credit guarantee insurance.

Analysis:
The judgment delivered by the High Court of Andhra Pradesh addressed the issue of whether the assessee was entitled to weighted deduction under section 35B of the Income-tax Act for the expenditure incurred on export credit guarantee insurance. The Income-tax Officer had disallowed a portion of the claimed expenditure, specifically Rs. 2,05,211, related to export credit guarantee insurance. The appellate authorities had allowed the weighted deduction for this amount, determining that it fell within the purview of sub-clauses (ii) and (viii) of section 35B(1)(b) of the Act.

The court examined section 35B, which provides for deductions for certain types of expenditure incurred for export market development. The expenditure eligible for deduction under this provision is closely linked to export business activities. The payment made by the assessee for obtaining information about market potential and to the export credit guarantee corporation was considered. The court found that the expenditure for obtaining market information fell within sub-clause (ii) of section 35B(1)(b) as it related to surveying export potential. The payment to the export credit guarantee corporation was analyzed under sub-clause (viii) as it was for ensuring financial capacity and risk mitigation in an export contract.

The court distinguished previous judgments cited by the Revenue, emphasizing that the nature of activities and expenditure in the present case was distinct. The court referred to various decisions from different High Courts, illustrating the interpretation and application of section 35B in similar cases. The court agreed with the Appellate Tribunal's conclusion that the expenditure in question qualified for deduction under sub-clauses (ii) and (viii) of section 35B(1)(b).

In conclusion, the court answered the question in the affirmative, ruling in favor of the assessee. The judgment highlighted the importance of adhering to the specific criteria outlined in section 35B for claiming weighted deductions related to export business activities. The court emphasized that a strict interpretation of the provisions was necessary to achieve the intended purpose of providing incentives for export market development.