TMI Blog2005 (8) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... re by way of commission to the Belgium agent qualified for weighted deduction within the meaning assigned under section 35B(1)(b) (iv) of the Income-tax Act, 1961?" The brief facts of the case are as follows: The assessee opposite party is a partnership firm and carries on the business of manufacture and export of hand knitted woollen carpets. During the accounting period relevant to the assessment year 1983-84, they claimed weighted deduction under section 35B(1)(b)(iv) of the Act on the foreign agent's commission amounting to Rs. 4,60,432.60 paise paid to M/s. Jack Barouk of Belgium on the count that they had entered into an agreement with the Belgium party under whom the foreign agent was to work for the assessee in the promotion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agency outside India. He can operate through foreign agent. Therefore, while agreeing with the contention of the learned counsel, we allow the deduction as claimed under section 35B(1)(b)(iv) of the Act." We have heard Sri A.N. Mahajan, learned standing counsel appearing on behalf of the Revenue and Sri S.K. Garg, learned counsel appearing on behalf of the assessee. Learned standing counsel submitted that the assessee did not own or maintain any of his branch or any agency outside the country and the commission has been paid to the foreign agent for procuring orders, etc. Thus, the said commission paid by the assessee does not fall within the purview of sub-clause (iv) of section 35B of the Act. In support of his contention, he relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall have effect as if for the words 'one and one-third times', the words 'one and one-half times' had been substituted. (b) The expenditure referred to in clause (a) is that incurred wholly and exclusively on-... (iv) maintenance outside India of a branch, office or agency for the promotion of the sale outside India of such goods, services or facilities." The aforesaid clause came up for consideration before the apex court in the case of Aravinda Paramila Works v. CIT [1999] 237 ITR 284. In that case also the applicant has engaged an agent for procuring the orders for the assessee and the commission was paid to the agent outside India who had procured the orders. The question for consideration before the court was whether commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gency' 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." The apex court held that sub-clause (iv) required that the assessee should have maintained the branch, office or agency for the promotion of sales outside India of the assessee's goods, services or facilities. The apex court further held that expenditure incurred by way of payment of commission on particular sales is not expenditure on the promotion of the assessee's sales in general. The case cited by learned counsel for the assessee CIT v. Assam Frontier Tea Ltd. [2002] 253 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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