TMI Blog2000 (10) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee is entitled to the allowance of weighted deduction under section 35B of the Income-tax Act in respect of the expenditure on payment of commission ?" The assessee is engaged in the business of manufacture and sale of carpets. In the course of its business, the assessee also exported carpets out of the country. In its assessment for the assessment year 1980-81, the assessee claimed weighted deduction under section 35B of the Income-tax Act, 1961 ("the Act"), in respect of commission of Rs. 33,500 paid to a carpet and textile commission agent, Shri Vinod Mewawalla. According to the assessee, Shri Mewawalla was instrumental in bringing the assessee and the foreign customers together for the sale of carpets on CIF basis. He clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal accepted the contention of the assessee and held that weighted deduction would be allowable to the assessee in respect of the amount of commission because there was a direct nexus between the expenditure incurred by the assessee and the export sales. The Tribunal reversed the order of the Income-tax Officer and the Commissioner of Income-tax (Appeals) and directed that weighted deduction should be allowed to the assessee in respect of the commission payment of Rs. 33,500. Aggrieved by the above order, the Revenue is before us by way of the present reference. We have heard Mr. Anil Bhan, learned counsel, for the Revenue, who submits that the assessee is not entitled to weighted deduction under section 35B of the Act in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion regarding markets outside India for such goods, services or facilities ... (vi) furnishing to a person outside India samples or technical information for the promotion of the sale of such goods, services or facilities." It is clear from a plain reading of the above section that only such expenditure will qualify for weighted deduction which is incurred wholly and exclusively on any of the activities referred to in the various sub-clauses of clause (b) of sub-section (1) of the Act. If the expenditure is not relatable to any of the activities referred to in the various sub-clauses of clause (b), no weighted deduction will be available. In order to get deduction under this section, the assessee will have to prove that the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the expenditure incurred by the assessee and the export sales. The Tribunal, in our opinion, was not correct in saying so because none of the sub-clauses provide for deduction in respect of expenditure incurred on activities which have a direct or indirect nexus with the export sales. It appears that the assessee tried to contend before the Commissioner (Appeals) that the commission paid by him to the agent was covered by sub-clause (i) or (ii) or (vi) of clause (b). Sub-clause (i) speaks of expenditure incurred wholly and exclusively on advertisements and publicity outside India in respect of the goods, services or facilities which the assessee deals in or manufactures in the course of his business. Sub-clause (ii) speaks of expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a case could not have held that the assessee was entitled to weighted deduction. It may be pertinent in this connection to refer to the decision of the Supreme Court in CIT v. Hero Cycles Pvt. Ltd. [1997] 228 ITR 463, wherein it has been held : "The deduction is permissible if the expenditure is laid out wholly and exclusively for the purposes mentioned in clause (b) of section 35B(1). It is for the assessee to prove that the entire expenditure involved was exclusively for the purposes mentioned in clause (b) of section 35B(1). The Tribunal has also to give a finding as to the entitlement of the assessee with reference to the particulars of clause (b) of section 35B(1)." The Commissioner of Income-tax in the present case has record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intenance outside India of agencies for the promotion of the sale outside of its agarbathis. It was held : "What is required is an analysis of the provisions of section 35B(1)(b)(iv). The expenditure that is referred to therein has to be incurred 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 outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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