9911796707
TMI Blog1986 (2) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... s paid to Surveyors Rs. 26,754 6. Export inspection fees paid to Govt. Rs. 34,580 7. Commission to brokers Rs. 1,67,285 8. Salary paid to Export executives Rs. 22,463 . Total : Rs. 3,25,677 As against the claim of the assessee the ITO allowed weighted deduction on a total expenditure of Rs. 2,43,897 the particulars of which are as follows: 1. Froms, stamp papers etc. for obtaining export licences (This was wrongly mentioned by the ITO as relating to the printing and stationery charges) Rs. 5,586 2. Sending of samples Rs. 9,692 3. Certifying charges paid to Surveyors Rs. 26,754 4. Export inspection fees paid to Govt. Rs. 34,580 5. Commission to brokers Rs. 1,67,285 . Total : 2, 43,897 The ITO actually granted weighted deduction of Rs. 81,299 representing 1/3rd of Rs. 2,43,897. 3. Aggrieved by the ITO's assessment order dt. 12th Nov., 1981 for the short allowance of weighted deduction under s. 358 the assessee went in appeal before the CIT(A). During the course of hearing of the appeal, the ld. CIT(A) felt that weighted deduction was granted on some items of expenditure on which the assessee is not entitled to weighted deduction and therefore, he iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.e.f. 1st April, 1981. But however, we are concerned with asst. yr. 1980-81 for which the previous year is date much prior to 1st April, 1981. Sub-cl. (v) allows weighted deduction when the expenditure is incurred in preparation and submission of tenders for the supply or provision outside India of such goods, services or facilities and activities incidental thereto. In fact the forms and stamp papers should be taken to have been required for obtaining export licences as this fact was found by the ld. CIT(A) in his orders. Sub-cl. (vi) deals with expenditure in connection with furnishing to a person outside India samples or technical information for the promotion of the sale of such goods, services or facilities whereas sub-cl. (viii) deals with expenditure incurred on performance of services outside India in connection with or incidental to the execution of any contract for the supply outside India in connection with or incidental to the execution of any contract for the supply outside India of such goods, services of facilities. Now it is contended by the learned advocate for the assessee that relevant export licences were to be obtained to execute the contract with foreign buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the total expenditure would not only relate to the selling activity but also to the purchasing activity and he presumed that 50 per cent of the expenditure on printing and stationery would relate to the selling activity. Out of the remaining 50 per cent viz., Rs. 61,319 only 1/6th i.e. Rs. 10,220 could be allocated to export sales. Again out of Rs. 10,220, 90 per cent could be allocated to the activity specified in s. 35B(1)(b)(iii) and therefore the considered the balance of Rs. 1,022 only for weighted deduction holding that so much amount only falls under sub-clause other than sub-cl. (iii). The matter is already covered by the Bombay Special Bench of the Tribunal in J. Hemachand & Co. vs. Second ITO (1982) 1 SOT 150 (Bom) (SB) according to which 50 per cent of the printing and stationery expenses are allowed. We follow the said decisions and hold that 50 per cent of the second item of the claim made by the assessee under the head printing and stationery expenses is to be allowed. 7. The third item is sending of samples and the amount of expenditure claimed there under is Rs. 9,692. The ITO as well as the CIT(A) allowed this item for weighted deduction. So we need not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Both these items were allowed by the ITO whereas they were withdrawn by the ld. CIT(A) on the ground that they fall under s. 35B(1)(b)(iii) as they were incurred in India. These two items represent the same nature of expenditure. Unless these expenses are incurred the goods cannot be exported outside India. They are expenses essentially to be incurred for the execution of any contract for the supply outside India of goods, services and facilities and directly covered by sub-cl. (viii) of s. 35B(1)(b). These expenses were allowed in full by the Bombay Special Bench in J. Hemcahnd's case, and hence we allow both these items in full and direct the ITO to consider them for weighted deduction. We set aside the CIT(A)'s order with regard to these two items and restore that of the ITO. 10. The seventh items is the commission to brokers. The claim was with regard to the amount of Rs. 1,67,285. The particulars of the amounts of commission paid to various parties are given below: 1. M/s A. V. Menon & Co. Madras Rs. 14,612 2. M/s M. R. Chandran & Co. Bombay Rs. 27,758 3. M/s Heeralal & Co. Goa Rs. 18,031 4. M/s Raja Ramanlal & Co. Madras Rs. 6,545 5. M/s Tribune Produce Brokers, Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t: The certificate is dt. 13th Jan., 1983. "This is to certify that we are Brokers and to not trade on our own. We keep overseas Buyers and domestic sellers informed of market conditions and try to bring them together. We do brokerage business mainly for Oilcakes and Cattle Feed. We did business for M/s T. G. Lakshmaya Setty & Sons, Adoni, during the period 1st Nov., 1978 to 20th Oct., 1979. We charge commission of 1/2 per cent on the contract value, goods shipped or hot shipped contract cancelled or not cancelled." This certificate is admitted to have been filed before the ld. CIT(A). So also, the certificate dt. 16th Feb., 1983 from M/s Marshall Produce Brokers Co. (P) Ltd. (item 6 of the list above), is as follows: "We certify that we are Brokers bringing together the foreign buyers and domestic sellers and inform the buyers about the clients' goods. We do brokerage business in Oilcake etc. We did business for T. G. Lakshmayya Setty & Sons during the period 1978-79 (i.e. from 1st Nov., 1978 to 20th Oct., 1979) for a commission of 1/4 per cent to 1 per cent on total contract value/tonnage." So also, almost similar certificate was obtained from M/s Veljee Shamjee & Co., (item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions under s. 35B were determined at 10 per cent of the total services and so excusing 10 per cent of the total paid to the agents they have directed 90 per cent of the expenditure paid as agent's commission. As already stated, the Bombay Bench decision was furnished at pages 13 to 33. The assessee's counsel relied on the same in support of his contention. The next order on which he relied upon was of the orders of B-Bench of this Tribunal dt. 5th Jan., 1984 passed in ITA No. 470 (Hyd)-1983 in the case of Maddi Laxmaiah & Co. (P) Ltd. In the case also payments were made besides State Trading Corporation to of M/s Maddi Laxmaiah & Co. (P) Ltd., Guntur & Agrimoor (P) Ltd., Guntur. Those payments were held to be inadmissible for weighted deductions by the first appellate authority following the decision of the Madras High Court in CIT vs. Southern Sea Food (P) Ltd. (1982) 31 CTR (Mad) 23 : (1983) 140 ITR 855 (Mad). But this Tribunal specifically found that the Bombay High Court had taken a contrary view in CIT vs. Eldee Wire Ropes Ltd. 1978 CTR (Bom) 296 : (1978) 114 ITR 485 (Bom). Admittedly the services were procured for the purpose of securing export orders. The 'B' Bench of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eel that the said order cannot be followed and cannot be given precedence over the Special Bench decision in J. Hemchand & Co.'s case. Therefore, we hold that the commission payment of Rs. 1,67,285 is entitled for weighted deduction under s. 35B. We therefore, hold that excluding 15 per cent of the total of Rs. 1,67,285 paid as commission to brokers rest of the amount is entitled to weighted deduction under s. 35B as the said expenses fall within sub-cls. (i) and (ii) under s. 35B(1)(b) and not under s. 35B(1)(b)(iii). 12. The last item which remains for our consideration is the salary paid to executives. The ITO did not allow anything. The CIT(A) allowed Rs. 1,137 only. The salary paid to export executive is Rs. 22,463. The CIT(A) holds that they were paid not only for looking after export business but also for various other business activities of the appellant. He had taken 50 per cent of their salary as relating to export business and out of it he had excluded 90 per cent towards activities referred to under s. 35B(1)(b)(iii) as this was an expenditure in India and after 31st March, 1978. Therefore, he had taken a balance of Rs. 1,137 only as entitled for weighted deduction. Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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