TMI Blog1991 (7) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign agents as qualifying for weighted deduction as admissible under sub-clause (iv) of section 35B(1) without considering the fact that sub-clause (b)(iii) of section 35B of the Incometax Act, 1961, has been omitted with effect from April 1, 1978 (sic) ?" The assessee is an agent to effect sales of sandalwood oil and other goods manufactured by a public sector undertaking belonging to the State Government which is now known as Karnataka Soaps and Detergents Limited. For the purpose of effecting sales abroad, the assessee entered into certain agreements whereby sub-agents were appointed for different territories in foreign countries like the U. S. A. and Japan. The copies of the agreements produced before us show that the sub-agent i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b)(iv) of the Income-tax Act in respect of the commission paid to the sub-agents. The relevant provisions of section 35B read thus: "(1) (a). Where an assessee, being a domestic company or a person (other than a company) who is resident in India, has incurred after the 29th day of February, 1968, but before the 1st day of March, 1983, whether directly or in association with any other person, any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) referred to in clause (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. (1) (b). The expenditure referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l rule and this was enacted obviously to encourage exports and to earn goodwill for Indian goods in foreign markets. This provision was in force only for a limited period. Even within section 35B, some of the clauses were omitted earlier to the omission of clause (iv) quoted above. The Appellate Tribunal proceeded on the assumption that, if the benefit of deduction under the said sub-clause (iv) is not granted, the reference to agency in the said sub-clause will become otiose. We do not think so. The sub-clause (iv) permits a deduction in respect of expenditure incurred wholly and exclusively on maintenance outside India of a branch, office or agency. The word "agency" occurs along with the other two words "branch" and "office". Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly" on the various activities referred to in sub-clauses (i) to (ix) of clause (b). If the expenditure is relatable to anything else, certainly this provision cannot be attracted. Further, under sub-clause (iv), the expenditure incurred for the maintenance of the agency should be for the promotion of the sales outside India. Therefore, the maintenance of the agency for the sale promotional purposes alone is covered by the relevant words of sub-clause (iv) and such expenditure should be entirely incurred for the said purpose. The commission paid in the instant case certainly includes a remuneration for the agent for procuring a particular sale and it is not a commission for the promotion of the sales as such by building up a market for sanda ..... X X X X Extracts X X X X X X X X Extracts X X X X
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