TMI Blog1993 (6) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... section 35B of the Act on the brokerage paid on export sales at Rs. 2,61,027 and Rs. 3,85,763 for the assessment years 1978-79 and 1980-81, respectively. The Income-tax Officer allowed relief under section 35B on 50 per cent. of the said amounts and while allowing the relief he took into consideration the Special Bench decision in the case of J. Hemchand and Co. (1 SOT 150). When the matter came up in appeal, the Commissioner of Income-tax (Appeals), after considering the facts and circumstances of the case, directed the Income-tax Officer to examine the question of allowability in the light of the decision in CIT v. Southern Sea Foods (P.) Ltd. [1983] 140 ITR 855 (Mad). The assessee took the matter to the Tribunal. The assessee contended that the Commissioner of Income-tax (Appeals) was not justified in directing the Income-tax Officer to examine the question of allowability afresh, but he should have upheld the allowance made by the Income-tax Officer. The Departmental representative supported the order of the Commissioner of Income-tax (Appeals). The Tribunal found that the relief was allowed by the Income-tax Officer following the Special Bench decision of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. According to the assessee, the commission was paid to Messrs. Mody Export Pvt. Ltd. in consideration of their having secured export orders. The question is whether this is expenditure covered by clause (ii). In our judgment, it does not. Clause (ii) does not deal with obtaining of export orders ; it relates to obtaining of information regarding markets outside India. Information about markets outside India, international market intelligence, world market surveys and the like, are matters of general nature. In contrast, the securing of export orders is a matter having particular reference to the particular commodity in question with which the foreign buyer was concerned, the price to be agreed, the quality and the quantity, the mode of carriage, delivery and other particulars. It would be a gross understatement, if not a mis-statement, to say that procuring orders is merely procuring information concerning the export markets. Sub-clause (ii) would not, therefore, apply to this case. The Tribunal was in error in thinking otherwise. Sub-clause (iv) refers to expenditure incurred wholly and exclusively on 'maintenance outside India of a branch office or agency for the promotion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egatived by the Income-tax Officer and the Tribunal. On a reference it was held by the High Court that the assessee would not be eligible for weighted deduction as the expenses were incurred in India. In arriving at the said decision, the Madras High Court observed that the weighted deduction under section 35B(1)(b)(iii) of the Income-tax Act, 1961, will be available only in respect of expenses incurred outside India and not in respect of expenses incurred in India if the distribution of the goods is outside India. To maintain that weighted deduction will be available even where expenditure is incurred in India would go against the teeth of the specific exclusionary provision. A look at the other sub-clauses of section 35B(1)(b) also shows the insistence of Parliament that the weighted deduction cannot be exigible unless the expenditure under the different heads are incurred outside India. Learned counsel for the Revenue further relied on the decision of the Kerala High Court in CIT v. C. Tharian and Sons [1987] 166 ITR 607, where following the decision of the above two Madras High Court decisions, the Kerala High Court held at page 609 of the Reports : "The expenditure ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction will not include expenses incurred in India. Expenses under other sub-clauses qualify for weighted deduction under section 35B of the Act notwithstanding that the expenses were incurred in India. The decisions of the Delhi High Court in CIT v. Jay Engineering Works [1984] 149 ITR 297, and the Bombay High Court in CIT v. Eldee Wire Ropes Ltd. [1978] 114 ITR 485 and CIT v. Prakash Cotton Mills P. Ltd. [1991] 188 ITR 713, are cited for the same proposition. In both the decisions of the Madras High Court the expenses were held not eligible under sub-clause (iii) of section 35B(1)(b) of the said Act as they Were incurred in India. But it is not the case of the assessee in this reference that the said brokerage fell within sub-clause (iii) of section 35B(1)(b) of the Act. Hence the said decisions of the Madras High Court are not applicable. So far as brokerage paid for obtaining export orders is concerned, reference has been made to the decisions of the various High Courts including this court that weighted deduction on such brokerage is allowable under section 35B of the said Act. In CIT v. G. E. C. of India Ltd. [1991] 192 ITR 559, this court held that there was nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls under any one or more of the activities specified in these sub-clauses, it can at best be judged only with reference to the facts of the particular case and the nature of the claim. It was also pointed out that the Full Bench decision of the Tribunal with regard to admissibility of weighted deduction has not been accepted to be correct inasmuch as a special leave petition had been filed in the Supreme Court in the case of CIT v. Orient Co. (P.) Ltd. (F. No. 270/155/80-ITJ). It has been held by this High Court in the case of Birla Jute Manufacturing Co. Ltd. v. CIT [1986] 162 ITR 413, that in order to be eligible for weighted deduction by way of export markets development allowance, it is required to be established by the assessee that the expenditure for which such deduction was being claimed had been incurred wholly and exclusively for the specified purposes. In the instant case, no evidence was produced as to what services were rendered for which the commission was paid on export sales. We have considered the rival contentions. The last strand in the Revenue's argument as to the nexus of the expenditure with the export trade is a contention that does not arise from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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