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TMI Blog1999 (3) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the applicant was not entitled to the weighted deduction under section 35B(1)(b)(iv) of the Act, in respect of the commission payments made to ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aiming 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 maintain such agency for it was only such expenditure which could fall within the ambit of the said clause. The word "maintenance" could not be equated with the concept of payments made depending on the actual work turned out. It indicated that, irrespective of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 concerned would not fall within the ambit of the clauses in section 35B. The Gujarat High Court in CIT v. Cadila Laboratories (P.) Ltd. [1996] 221 ITR 35 referred to the meaning of the word "agency" as found in Halsbury's Laws of England. It is there stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, be interpreted in the light of the words "branch" and "office", it is, in any event, very clear that even if the agency is an agency established not by the assessee but by a third party, the agency must be maintained by the assessee. In the result, we uphold th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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