TMI Blog1999 (3) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... High Courts have taken divergent views. We are concerned with the assessment year 1981-82. The assessee manufactured agarbathis. It had exported agarbathis during the year under consideration. It had paid commission to agents outside India who had procured orders. It claimed weighted deduction under the aforementioned provision in respect of such expenditure of Rs. 13,23,225. It was disallowed by the assessing authority, The Commissioner of Income-tax (Appeals) took a contrary view. The Income-tax Appellate Tribunal held that the Commissioner (Appeals) was not justified in allowing the said weighted deduction. From out of the judgment and order of the Tribunal, the following question was referred to the High Court for its consideration : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and observed that this would have been relevant if it was shown that the establishment of the agency outside the country had been maintained by the assessee, but there was no material placed before the Tribunal or any of the authorities concerned for claiming that an agency had been maintained by the assessee. In Chief CIT v. Mysore Sales International Ltd. [1992] 195 ITR 457 the Karnataka High Court took the view that the word "agency" in the aforesaid provision had to be read ejusdem generis with the expression "branch" and "office" used in the said provision. The meaning attributable to "agency" would, therefore, have to be something which had some flavour resembling that of a branch or office. That apart, the assessee had to maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an agency abroad "that agency cannot refer to any independent establishment of the assessee being maintained abroad because agency always connotes the independence of the agent". The requirement of the provision was sufficiently satisfied "if there is an agent outside who promotes the sales of the assessee's exports". The High Court at Gauhati in CIT v. Assam Frontier Tea Ltd. [1997] 224 ITR 398 has followed the Calcutta High Court without assigning any independent reasons. The Kerala High Court in CIT v. Pooppally Foods [1986] 161 ITR 729 has taken the same view as the Calcutta High Court, but there is no discussion of the provision, apparently because the Revenue had never before chosen to raise the point that the expenditure there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices or facilities. When payment is made, as here, by an assessee of commission to agents outside India who had procured orders, the requirements of clause (iv) are far from satisfied. There is, in the first place, no maintenance by the assessee of the agency. Secondly, the expenditure has to be incurred on the promotion of sales of the assessee's goods outside India. When expenditure is incurred by way of payment of commission on particular sales, that is not expenditure on the promotion of the assessee's sales in general. While we think that there is some merit in the observation of the Karnataka High Court that the words "branch, office or agency" in the clause draw colour from each other and that the word "agency" should, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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