TMI Blog1989 (6) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... arkets development allowance in respect of expenditure of Rs. 8,16,274. According to the Income-tax Officer, these expenses included shipping expenses, bank commission, administrative expenses, salary, postage, etc. He held that except the expenditure of Rs. 1,30,500 incurred on account of foreign travelling, the assessee was not entitled to the allowance under section 35B. Against the Income-tax Officer's decision, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). Following the Special Bench order of the Tribunal on this issue, he held : " The first item of Rs. 97,942 relating to analysis, weighment, supervision charges, etc., will be clearly inadmissible. Bank commission relating to the discounting of bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness and foreign markets which come to Rs. 16,510. Since this apportionment itself has been specifically given from the total expenditure relating thereto which was before the Income-tax Officer right from the assessment stage, this amount of Rs. 16,510 will be included for purposes of weighted deduction. The last item of Rs. 780 relates to foreign periodicals which are subscribed to by the appellant. The amount of Rs. 780 will also be included for weighted deduction. The Income-tax Officer will please revise the calculation of weighted deduction under section 35B in the light of the above directions in this order. Consequential relief will be available to the appellant. " On second appeal, the Tribunal held thus: "We have heard both si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that the premium paid to the Export Credit Guarantee Corporation was incurred for obtaining information regarding the creditworthiness, reputation and fixing the limits of its buyers and the expenditure qualified for weighted deduction under section 35B(1)(b). The Andhra Pradesh High Court, in CIT v. Navabharat Enterprises (P.) Ltd. (No. 1) [1988] 170 ITR 326, has held that the expenditure claimed by the assessee for payment to the Export Credit Guarantee Corporation is for being apprised of the creditworthiness of the foreign buyer and for providing guarantee for the payment. Such payment is to ensure the financial capacity of the foreign buyer to fulfil the commitment of deferred payment and insulate the assessee against the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent-assessee in I. T. A. No. 163 of 1981, in which it has been stated that the Central Board of Direct Taxes has accepted the correctness of the decision of the Special Bench of the Appellate Tribunal in the case of J. Hemchand and Co. v. Second ITO (I. T. A. No. 3255 of 1976-77) and further that several Commissioners of Incometax have issued instructions that reference applications under section 256(1) or section 256(2) need not be filed or, if filed, need not be pressed to challenge the correctness of the law laid down by the Special Bench of the Appellate Tribunal in the aforesaid case. Learned counsel for the Department produced before us that circular. We find that the Central Board of Direct Taxes has, by its circular da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign trade journals and it cannot be said that such expenses do not relate to export promotion. As a matter of fact, in 1981, rule 6AA was inserted in the Income-tax Rules, 1962, prescribing the activities for export markets development allowance under sub-clause (ix) of clause (b) of sub-section (1) of section 35B. One of the activities for promotion of sales would be purchase of foreign periodicals or journals relating to the export business of the assessee. Having regard to the facts and circumstances of this case, we are of the view that such expenditure is allowable under section 35B which facilitates the carrying on of the export business. For the foregoing reasons, we answer the question in this reference in the affirmative and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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