TMI Blog2003 (3) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 12-3-2003 - Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by S.H. KAPADIA J.-This group of references raise common questions of law and fact and, therefore, they are disposed of together by this common judgment. For the sake of convenience, we have taken the facts in Income-tax Reference No. 201 of 1995. In this group of references, two questions of law have have been referred to us for the opinion by the Tribunal under section 256(1) of the Income-tax Act, 1961. Question No. 1: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing the assessee's claim of deduction of Rs. 19,17,820 on account of amount paid by the State Bank of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y cannot constitute revenue expenditure. In other words, it was argued that the test, which applies to the recipient of the subsidiary, should also equally apply to the payer of the subsidy. He further contended that the State Bank of India had paid subsidy to enable its subsidiaries to open new branches and, consequently, the subsidy was used to create assets and, therefore, the expenditure was capital expenditure and not revenue expenditure incurred by the State Bank of India. Findings: We do not find any merit in the arguments advanced on behalf of the Department. The Statement of Objects and Reasons for enacting the said Act of 1959 indicates reconstitution of the State Bank of Patiala, the State Bank of Saurashtra, the State Bank o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Saurashtra, the State Bank of Patiala, etc., under section 48(1) of the said Act of 1959, represented revenue expenditure. Lastly, we may mention that in the case of Empire Jute Company Ltd. v. CIT [1980] 124 ITR 1, it has been held by the Supreme Court that what may be a capital receipt in the hands of the payee, need not necessarily be capital expenditure in relation to a payer. In the circumstances, there is no merit in the argument of the Department that because the subsidy is not income in the hands of the payee, it cannot be revenue expenditure in relation to the payer. Accordingly, we answer the above quoted question in the affirmative, i.e., in favour of the assessee-bank and against the Department. Question No. 2: "Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion whether the assessee has exported any goods during the relevant year or whether he has earned any profits out of exports. Section 35B does not refer to export profits as in the case of section 80HHC. Section 35B refers to expenditure incurred by an assessee to promote export markets. It is not in dispute that the State Bank of India has branches all over the world outside India. It certainly facilitates and promotes export markets, both in India and outside India. Therefore, we hold that the State Bank of India is eligible for this allowance under section 35B of the Income-tax Act. However, as stated above, it was argued on behalf of the Department that even if the State Bank of India was eligible for allowance under section 35B, st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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