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TMI Blog1982 (1) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 2. Insurance of goods 5,283 3. Transport freight 2,952 4. Transport steamer freight paid for export of goods 2,93,652 5. Bank commission 3,400 6. Miscellaneous expenses 1,215 The ITO disallowed the claim of the above items on the ground that they were not covered by any of the sub-clauses of clause (b) of section 35B(1). 2. The assessee came in appeal to the Commissioner (Appeals). It was submitted before him that in view of the decision of the Bombay High Court in the case of CIT v. Eldee Wire Ropes Ltd. [1978] 114 ITR 485, the assessee was entitled to the relief under section 35B in respect of the above items. It was also submitted before the Commissioner (Appeals) that similar claim of the assessee had been accepted in the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the first four items, while the department is aggrieved with the allowance of the claim in regard to the last two items. We will first deal with the assessee's appeal. The learned counsel for the assessee submitted before us that in the first place its claim could not be rejected under sub-clause (iii) of clause (b) of section 35B(1) as was contended on behalf of the department. He pointed out that after the addition of the words "where such expenditure is incurred before the 1st day of April, 1978" at the end of the above clause, the prohibition obviously related only to such expenditure, which was incurred before 1-4-1978 and there was no such prohibition even under sub-clause (iii) in respect of expenditure incurred after 1-4-1978. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avail to the department. His further submission was that the case of Happy Sound Industries related to the assessment year 1975-76, while the amendment, as pointed out above, was carried out in sub-clause (iii) by the Finance Act, 1978, with effect from 1-4-1978 and, therefore, also that decision had no application to the present case. To support his submissions, he relied upon the decisions of the Bombay High Court in Eldee Wire Ropes Ltd. and the Madras High Court in CIT v. Kasturi Palayacat Co. [1979] 120 ITR 827. In particular, he invited our attention to the last para at page 836 of the report, according to which the packing charges incurred did not fall within sub-clause (iii). His submission was that in any case, cost of packing cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: "(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 incurred in India in connection therewith or expenditure (wherever incurred) on the carriage of such goods to their destination outside India or on the insurance of such goods, while in transit where such expenditure is incurred before the 1st day of April 1978." (Inserted by the Finance Act, 1978 with effect from 1-4-1978) In our opinion, the word "such" appearing at the end of the clause refers to expenditure incurred wholly and exclusively on distribution, supply or provision outside India of such goods, services or facilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of the order in this case, it was held that sub-clause (viii) covered the expenditure which an exporter incurred on the performance of services outside India after the goods had been delivered to or were received by the foreign buyers at the destination. The Full Bench was of the view that this sub-clause did not include expenditure on carriage of goods to their destination outside India and on insurance of such goods while in transit. The Full Bench gave a categorical finding in para 19 of the order that the assessee was not entitled to weighted deduction under sub-clause (viii) in respect of the expenditure on carriage of goods exported to their destination outside India or on the insurance of such goods while in transit. We do not agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms duty paid and the packing charges incurred by the said branches for the import of the textile goods from India were entitled to weighted deduction under section 35B, as they did not fall in the category contemplated by clause (b). The reference in this case is to those packing charges which are incurred by the branches for the export of the goods and not for those packing expenses which have been incurred in order to export the goods from India. The above decision, therefore, does not apply to the facts of the present case. This issue also came up for the consideration of the Full Bench in Happy Sound Industries. The Bench agreed with the earlier view of the Special Bench expressed in the case of J. Hemchand & Co. in IT Appeal Nos. 325 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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