1980 (8) TMI 116 - AT - Income Tax

Summary

Issues:
- Allowance of weighted deduction u/s 35B for business expenses incurred by a ship broker.

Analysis:
The judgment pertains to the allowance of weighted deduction u/s 35B for a ship broker's business expenses. The assessee, a ship broker, claimed weighted deduction on expenses related to telex charges, overseas telephone calls, postal expenses, and advertisement costs incurred for providing services and facilities for the export of goods outside India. The Income Tax Officer (ITO) rejected the claim, stating that the deduction was meant for expenses incurred outside India for developing the export market. The ITO referred to specific provisions and explanations to support the denial of the deduction based on the nature of the assessee's activities.

Before the ld. AAC, it was argued that the ITO wrongly assumed that all qualifying expenses must be incurred outside India and incorrectly invoked certain sub-clauses and explanations. The ld. AAC upheld the ITO's decision, stating that as a broker, the primary role of the assessee was to bring parties together and earn commission, hence not qualifying for the deduction based on the nature of the business.

Upon further appeal to the Tribunal, it was contended that the expenses were necessary for providing export-related services, and the claim was made under specific sub-clauses. The Tribunal found the claim to be valid, considering the nature of the business and the proportion of the claimed expenses. It also noted a similar decision in another case. The Tribunal concluded that the expenses were covered by the relevant sub-clauses and were reasonable.

The Commissioner proposed two questions for reference to the High Court, questioning the Tribunal's decision on the entitlement to weighted deduction under specific sub-clauses of Sec. 35B. However, the Tribunal found that the facts supported the assessee's claim under the mentioned sub-clauses, and no legal principles were in question. The Tribunal dismissed the reference application, stating that the issues were factual and concluded based on the facts found. Consequently, the reference application failed, and the judgment favored the assessee.