TMI Blog1993 (2) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was entitled to weighted deduction under section 35B(1)(b) on an expenditure of Rs. 7,47,005 incurred by the assessee, whether in India or outside India. " The aforesaid question arose out of the decision of the Appellate Tribunal dated December 24, 1979, by which the appeal filed by the assessee against the appellate order, annexure "B", dated June 21, 1977, of the Appellate Assistant Commissioner was partly allowed. Messrs. Roadmaster Industries of India (P.) Limited (hereinafter referred to as "the assessee") filed a return for the assessment year 1974-75. The assessee is engaged, inter alia, in the export of bicycles and spare parts thereof to foreign countries. In its return, the assessee claimed weighted deduction under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the port and had a bill of lading and in terms of the contract had obtained marine insurance cover besides paying sea freight. It was, therefore, held that " the expenditure on freight and marine insurance, in our opinion, therefore, on the facts and in the circumstances of the case, narrated in detail supra, was on supply of goods outside India to the foreign buyers as it was incurred for the carriage and security of the goods on the high seas". It was further held " the expenditure on railway freight by way of inland carriage from the manufacturing centre of the assessee to the port in India for exporting the goods on which the assessee paid sea freight and marine insurance is expenditure incidental to the supply of goods outside India by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (b), he shall, subject to the provisions of this section, be allowed a deduction of a sum equal to one and one-third times the amount of such expenditure incurred during the previous year : Provided that, in respect of the expenditure incurred after the 28th day of February, 1973, by a domestic company, being a company in which the public are substantially interested, the provisions of this clause 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 .. . . . (iii) distribution, supply or provision outside India of such goods, services or facilities, not being expenditure incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure incurred, whether in India or outside India, on the carriage of goods to their destination outside India or on the insurance of such goods while in transit, have been expressly excluded from weighted deduction under section 35B of the Act. In Bharat General and Textile Industries Ltd. v. CIT [1985] 153 ITR 747, after referring to the relevant decisions of the Madras High Court, Madhya Pradesh High Court and of the Delhi High Court, the learned judges of the Calcutta High Court analysed sub-clause (iii) to contain three prohibitions in the following words (at page 757) : " It appears to us that there are three prohibitions in sub-clause (iii) of section 35B(1)(b). Firstly, expenditure incurred in India in connection with distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds were sent to the foreign buyers. Once these conditions are held to have been satisfied, it would be of no consequence that the expenditure was incurred in India. What, according to Mr. Gupta, is of essence is that services are rendered outside India. We find merit in the contention of Mr. Gupta. Independently of the nature of the contract being CIF or C and F, section 39 of the Sale of Goods Act. 1930, casts a duty on the seller to make an appropriate contract with the carrier to ensure safety of the goods even though delivery to the carrier is tantamount to delivery to the buyer. It reads : "39. Delivery to carrier or wharfinger. - (1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure was incurred in India ; because there is no such condition laid down in sub-clause (viii) either expressly or by necessary implication as distinguished from subclause (iii) where the expenditure incurred in India has been specifically excluded. Expenditure on account of railway freight stands on a different footing. Carriage of goods by rail from the place of manufacture up to the port from where they were exported cannot, by any logic, be considered to be a service rendered outside the country. Sub-clause (viii) in terms is con fined to performance of services outside India. Performance of services, which qualify for weighted deduction under sub-clause (viii), must fulfil two conditions, namely, (a) the services must be in connec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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