TMI Blog1978 (12) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... he services rendered by the company cannot be said to be exclusively for the purposes of obtaining information and submission of tenders. The services included entertaining the persons concerned in addition to negotiating the dealings. He, therefore, held that the ITO allowed only 50 per cent of the expenditure will be said to be as being wholly and exclusively incurred for obtaining information and submission of tenders. So far as the expenditure on entertainment of foreign visitors incurred by the assessee, was concerned, a sum of Rs. 3,600 was incurred by M/s. Jay Prestressed Products Ltd., the ITO held that the same did not qualify either for allowance or for weighted deduction under s. 35B. Similarly, he did not allow weighted deduction in respect of expenses on account of taxi hire charges, stay expenses of directors and foreign visitors in the hotel at Madras and presentation to foreign buyers. So far as Madras Office expenses were concerned, the ITO held that the expenditure is for the purpose of purchase of granite, inspection of shipment and negotiating the terms of the contract. He, therefore, held that the same did not qualify for weighed deduction. So as the travelling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile not claiming the balance, and we have no reason to disbelieve the assessee's statement that the expenditure was incurred as above for export development. We are unable to find any merit the Revenue's argument that the entertainment expenditure would be disallowable under s. 37(2A) and is, hence, not allowable for weighted deduction under s. 35B. In this context, we may refer to s. 35B, according to which any expenditure (excluding capital expenditure or personal expenses of the assessee) incurred wholly and exclusively on the matters mentioned in sub-cl. to (ix) of s. 35B(1)(b) would be entitled weighted deduction which is equal to 1 1/3 times of such expenditure incurred during the year. Under s. 37(1), any expenditure (not being expenditure of the nature described in s. 36 and being in nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business of profession shall be allowed in computing the income chargeable under the head 'profits and gains of business or profession'. Under s. 37(2A) notwithstanding any item contained in sub-s. (1) or sub-s. (2), no allowance shall be made regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as only part of the job done there because purchasers go to Madras, they are taken to the quarries where they see the quality of the goods and then customer is solicited by the Madras office also and, therefore, to the extent that office was obtaining information regarding markets outside India for granite etc. the assessee would be entitled to weighted deduction under s. 35B. Reliance has been placed on a decision of the Bombay Bench of the Tribunal in the case of M/s L.M.N. Bombay(3) where the Tribunal has held that the assessee has to maintain an office premises even in India for the purpose of obtaining information regarding markets outside India and had allowed 50 per cent of the rent as qualifying for weighted deduction. There can be no doubt that foreign buyers would be going and inspecting the mines around Madras along with the assessee's representative and to the extent that the expenses pertained to the foreign buyers in obtaining information regarding markets outside India, the assessee would be entitled to weighted deduction. In our opinion, there has to be some apportionment in this regard because it does appear that the major work attended by the Madras office pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntation of articles to foreign buyers should not so qualify. Presentation of articles is to customers and the purpose is purely to solicit business from the foreign customers for export and by entertaining them and presenting them with articles, the assessee would obtain information regarding markets outside India. This is also the view of the AAC in para 3a of his order, although in para 6, he has upheld the disallowance. In our opinion, therefore, the assessee would be entitled to weighted deduction in respect of presentations made to the foreign buyers also. Ground No. 8 has not been pressed by the learned counsel for the assessee. The assessee's appeal is, accordingly, partly allowed. 8. In the departmental appeal, ground Nos. 2(b) and (c) have already been disposed of. We have held that weighted deduction has to be allowed on the presentation of articles but in respect of travelling expenses, the ITO's order was resorted. So far as the allowance of weighted deduction in respect of payments made by the assessee to M/s Jay Prestressed Products Ltd., Delhi, a sister concern of the assessee, is concerned, while the ITO had allowed weighted deduction in respect of 50 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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