TMI Blog1997 (12) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate Tribunal was right in holding that the royalty on export sales would qualify for weighted deduction under section 35B ?" The assessee is a public limited company engaged in the business of manufacture of tyres. The assessment for the assessment year 1976-77 was completed on September 24, 1979 determining the total income at Rs. 1,01,85,450 as against the returned income of Rs. 6,44,270. The assessee claimed before the Income-tax Officer that the assessee is entitled to weighted deduction under section 35B of the Act in respect of the export promotion expenses of Rs. 20,587 and the expenses incurred on foreign delegates in a sum of Rs. 64,420. The Income-tax Officer held that the assessee was not entitled to weighted deduction in respect of both the items on the ground that they were in the nature of entertainment expenditure. However, he allowed a sum of Rs. 10,000 towards the claim of the assessee for weighted deduction. He also disallowed the weighted deduction on royalty paid on export sales. The assessee preferred an appeal to the Commissioner of Income-tax (Appeals) against the order of assessment made by the Income-tax Officer. The Commissioner of Income-tax (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yalty amount also. In this view of the matter, the Tribunal dismissed the appeal preferred by the Department as regards the claim of the assessee for weighted deduction under section 35B of the Act. The Revenue being aggrieved sought for a reference and in pursuance of the direction of this court, three questions of law set out above have been referred for our consideration. The answer to the third question of law need not detain us as the issue raised in the question is covered against the assessee by the decision of this court in CIT v. Madras Rubber Factory Ltd. (No. 2) [1984] 149 ITR 411, wherein this court held that the assessee was not entitled to weighted deduction on the royalty paid on export sales. Following the said decision of this court in the assessee's own case, we hold that the Tribunal was not correct in holding that the assessee was entitled to weighted deduction on royalty paid. Accordingly, the third question of law referred to us is liable to be answered in favour of the Revenue. Questions Nos. 1 and 2 can be considered together and we have set out the necessary facts earlier. Mr. C. V. Rajan, learned counsel for the Revenue, submitted that the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and section 35B is an independent section and the restriction found in section 37 of the Act cannot be imported in the construction of section 35B of the Act. We have carefully considered the submissions made by learned counsel for the parties. We have also set out the facts in detail. The Tribunal, after considering the nature of the expenditure found that the object of the expenditure was contribution towards a joint publicity programme in the foreign countries and with a view to secure export orders. The Tribunal also found that the sole object with which the expenditure was incurred was to develop export market sales and it is in the light of the finding given by the Appellate Tribunal, the question whether the assessee is entitled to weighted deduction under section 35B of the Act has to be considered. Section 35B(1)(b)(ii) of the Act in so far as it is relevant for the purpose of the case, reads as under : "Obtaining information regarding markets outside India for such goods, services or facilities". A fair reading of the above provision indicates that where the assessee has incurred expenditure for obtaining information regarding markets outside India the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was held to be allowable gives an indication that the Department was also of the opinion that the expenditure would fall within one of the sub-clauses of section 35B(1)(b) of the Act. In addition thereto, the question whether the expenditure incurred on the foreign delegates would qualify for weighted deduction came up for consideration before the Calcutta High Court in CIT v. Bata India Ltd. [1989] 178 ITR 669, where certain expenses were incurred by the assessee therein towards visiting personnel from foreign countries in connection with the conference in India for the promotion of export and the Calcutta High Court held that the assessee was entitled to deduction on the export promotion expenses and the following observations are relevant for the purposes of the case : "The activities mentioned in sub-clauses (i) to (viii) do not cease to be activities for the promotion of the sale outside India of such goods, services or facilities because the expression 'activities for promotion of sale outside India' has not been specifically used in any of these sub-clauses. Advertisement or publicity outside India in respect of goods, services or facilities, obtaining information rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses would fall under sub-clause (ii) of clause (b) of sub-section (1) of section 35B of the Act. Since the consistent view of all the High Courts is that the assessee is entitled to weighted deduction on the expenditure incurred on the foreign delegates towards the hotel expenses, taxi charges and presentation of gift articles, we are inclined to follow the decisions of the other High Courts and hold that the assessee is entitled to weighted deduction in respect of both the sums claimed. The other contention of the Mr. C. V. Rajan, learned counsel for the Revenue, that the assessee is not entitled to weighted deduction because the expenditure incurred by the assessee is not allowable under section 37 of the Act requires to be considered. We are of the view that sections 37 and 35B of the Act are two independent sections and the mere fact that a particular expenditure may not be fully allowable or allowable subject to certain conditions under section 37 of the Act would not stand in the way of the assessee claiming the deduction under section 35B of the Act, if the assessee has satisfied the conditions prescribed under section 35B of the Act. In our view both the section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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