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Issues:
- Claim of weighted deduction by the assessee for the assessment year 1979-80. - Whether the assessee qualifies as a small scale exporter due to its activities in processing and blending tea dust. - Allowability of various claimed deductions by the assessee, including interest on packing credit, packing materials, ECGC premium, foreign travel expenses, salary, bonus, ex gratia, and commission to foreign agents. Analysis: 1. The appeal pertains to the assessment year 1979-80, where the assessee, a registered firm engaged in the purchase and sale of tea dust, claimed weighted deduction on various items. The Assessing Officer denied the claim, stating that the assessee did not qualify as a small scale exporter due to the absence of manufacturing or production activities. The CIT(A) upheld the denial, leading to the second appeal by the assessee. 2. The representative of the assessee argued that the firm's activities, involving buying, blending, packing, and exporting tea, constitute processing of goods, making the assessee eligible for concessional tax rates as an industrial company. Citing relevant case laws, the representative contended that the blending and packing of tea should be considered manufacturing, supported by the possession of a manufacturing license. The departmental representative, however, supported the CIT(A)'s view. 3. Upon reviewing the submissions and evidence, the Tribunal held that the CIT was unjustified in denying the assessee's claim for weighted deduction under section 35B of the Act. The Tribunal noted that the assessee exported tea dust after processing and blending it, substantiated by the provided financial statements. 4. The Tribunal deliberated on whether the assessee qualified as a small industrial undertaking, emphasizing the processing and blending of tea dust for export. Referring to precedents, including the Badrinarayan case, the Tribunal concluded that the assessee's activities constituted manufacturing, supported by the possession of a Central Excise license. Consequently, the Tribunal ruled in favor of the assessee, allowing the weighted deduction under section 35B. 5. The Tribunal further considered the applicability of the G.A. Rendering Ltd. case, highlighting the definition of "processing" in the context of industrial companies. Drawing parallels between the case law and the assessee's activities, the Tribunal affirmed that the assessee qualified as a small scale industrial undertaking, justifying the allowance of the claimed deductions under section 35B. 6. Subsequently, the Tribunal addressed the specific claimed deductions by the assessee, including interest on packing credit, packing materials, ECGC premium, foreign travel expenses, salary, bonus, ex gratia, and commission to foreign agents. Relying on relevant judgments and legal precedents, the Tribunal allowed most of the deductions, citing favorable decisions from the Madhya Pradesh High Court, the jurisdictional High Court, and the Special Bench of the Tribunal. 7. Ultimately, the Tribunal partially allowed the appeal, granting relief to the assessee on various claimed deductions, emphasizing the eligibility of the assessee as a small scale industrial undertaking entitled to weighted deductions under section 35B of the Act.
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