TMI Blog2005 (8) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India (HHEC) are not entitled to weighted deduction under sub-clauses (i) and (iv) of section 35B(1)(b) of the Income-tax Act?" The brief facts of the case are as follows: The assessee was a manufacturer and exporter of hand-knotted carpets. The assessee had paid commission to the Handicrafts and Handlooms Export Corporation of India Ltd. (in short "the HHEC") and claimed weighted deduction under section 35B(1)(a) and (b) of the Act. HHEC is alleged to be a subsidiary of the State Trading Corporation of India Ltd. (in short "the STC") under the administrative control of the Ministry of Textiles (Government of India). The said HHEC is alleged to be playing a role in developing exports of Persian design hand-knotted carpets from In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. Steps taken for developing exports of hand-knotted woollen carpets relate to. Product development 2. The HHEC has played a pioneering role in developing exports of Persian design hand-knotted carpets from India. Special attention is being paid to adaptation of new designs or introduction of new ones to suit the requirements of buyers from abroad. The corporation is a pace-setter in the field of product development. 3. For boosting exports of hand-knotted woollen carpets from India, the HHEC's carpets warehousing depot at Hamburg set up in 1965 has been doing a great deal of work for promoting the Indian carpets through regular participation in Heimtextile (Frankfurt) every year. Special publicity campaigns have been organised for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure foreign orders, in our opinion, is not enough to bring the said payments within the purview of sub-clause (iv) of section 35B(1)(b)." Heard Sri Ashok Bhatnagar, advocate holding brief for Sri S. B. L. Srivastava, learned counsel for the assessee and Sri A. N. Mahajan, learned standing counsel appearing on behalf of the Revenue. "Section 35B.(1)(a) Where an assessee, being a domestic company or a person (other than a company) who is resident in India, has incurred after the 29th day of February, 1968, whether directly or in association with any other person, any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) referred to in clause (b), he shall, subject to the provisions of this secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the maintenance outside India of a branch, office or agency for the promotion of sales outside India of the assessee's goods, services or facilities. Therefore, what is requisite is that the assessee should have maintained the branch, office or agency outside India. It is also requisite that such branch, office or agency should be for the promotion of sales outside India of the assessee's goods, services 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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