The Commissioner of Income tax. v. M/s. Industries Ltd., Bombay

1. By this reference, the following questions of referred Income Tax Appellate Tribunal for the opinion of this court under Section 256 (1) of the Income Tax Act.

Whether circumstances law, Income Tax Appellate Tribunal justified allowing assessee’s weighted deduction u/s.35B I.T.Act, expenditure headed "advertisement newspapers magazines publicity India"? This question has been raised in respect of three assessment years viz. 1976-77, 1978-79 and 1979-80.

Whether circumstances certificates origin :2: u/s. legalisation export documents allowable weighted deduction 35B Act? This question has been referred in respect of the assessment years 1977-78, 1978-79 and 1979-80.

Whether circumstances Income Tax Appellate Tribunal disallowing weighted deduction claimed inspection charges claimed assessee M/s. General Superintendent Co. India Export Inspection Agency? . This question was referred in respect of the assessment years 1976-77, 1977-78 and 1978-79.

Whether tribunal was right in holding assessee’s claim for weighted deduction on the expenses incurred on the following heads do not fall under Section 35B (1)(b) and in not allowing weighted deduction under Section 35B(1)(b). i) Special packing on goods exported. :3: ii) Gifts given to foreign parties. iii) lines. Proportionate printing stationary printer direct telephone This question was referred in respect of Assessment years 1976-77, 1977-78, 1978-79 and 1979-80.

Whether circumstances case, ITAT holding Rs.45,000/- assessee Registrar Companies, a deduction Rs.16,800/- allowable? This question was raised in respect of the assessment year 1976-77 only.

Whether circumstances tribunal holding assessee entitled revenue deduction expenditure Rs.45,124/- expenses market survey report? This question was referred in respect of the assessment year 1976-77 only. :4:

Whether circumstances ITAT rejecting assessee’s deduction liability? This issue was raised in respect of the assessment year 1976-77 only.

3. After hearing both the sides and perusing the record, we answer the questions referred as under. a)

As regards the Question No.1, we note that it is admitted position expenditure incurred advertisements publicity newspapers magazines India, company business India abroad

43.17% export sales. Counsel appearing assessee submitted Indian newspapers magazines advertisements given, a foreign circulation payments advertisements India a relevant factor deciding whether expenditure covered Section 35B(b)(i) whether a deductible expenditure. Reliance placed a judgment ITRITRITR CIT CIT CIT Vs. Vs. Vs. Prakash Prakash Prakash Cotton Mills Cotton Mills Cotton Mills reported reported reported 118 118 118 Page Page Page

713. 713. In answered question whether assessee entitled a a f Vs. Vs. Vs. In Tax :5: weighted deduction Section-35B expenses export markets development though expenditure incurred India. This question answered affirmative favour assessee footing question answered earlier judgment reported CIT CIT CIT Eldee EldeeEldee Wire Wire Wire Ropes Ropes Ropes Ltd. Ltd. Ltd. reported reported reported 114 114 114 ITR ITR ITR Page-485 Page-485 Page-485 Eldeee Wire Ropes Ltd. (supra) Vs. a CIT Act Section 35B Income 1961, legislature desired exclude expenditure incurred India purpose giving benefit deduction assessee export development allowance, expressly specifically mentioning exclusion clause(iii) Section 35B(1)(b). This further done, expenditure incurred assessee either outside India India, qualify a deduction, pertain purposes mentioned various sections Section 35B purposes pertain various activities outside India. In view, however, present case, weighted deduction cannot allowed entirely different reason. According assessee, deduction claimable expenditure covered Section 35B(b)(i). The relevant portion of Section 35B)b)(i) reads as under. :6: 35B(b) The expenditure referred clause (a) incurred wholly exclusively on- (i) advertisement publicity outside India respect goods, services facilities assessee provides course business( expenditure incurred before 1st April,1978).....(bracketed portion inserted Finance Act,1978 w.e.f.

1.4.1978 omitted Finance Act, 1980 w.e.f.

1.4.1981. . The requirement therefore, is that the expenditure exclusively advertisement incurred wholly publicity outside India. In present case, however, admitted percentage advertised within India, cannot expenditure incurred wholly exclusively exported goods. In matter a issue as referred must be answered in the affirmative and in favour of the revenue. b) As regards the question No.2, Counsel for the parties question answered Vs.Vs.Vs. Dr. Dr. Dr. Beck Beck Beck & & & Co. Co. Co. (India) (India) (India) Ltd. Ltd. Ltd. CIT CIT CIT reported reported reported 206 206 206 ITR ITR ITR Page Page Page -311 -311 -311

561.561. :7: ofofof CIT Vs. CIT Vs. CIT Vs. Dr. Dr. Dr. Beck Beck Beck Co. Co. Co. reported reported reported 239 239 239 ITR ITR ITR Page Page Page On perusal judgments, judgments pertain export inspection charges weighted deduction allowable Section 35B respect charges. In expenditure certificates origin, legalisation export documents documents amount expenditure performance services outside India expenditure activities promotion outside India expenditure cannot granted weighted deduction Section 35B. Following judgments the aforesaid reasons, we answer the question in the affirmative and against the assessee. c) As regards the Question No.3, Counsel appearing question already answered favour revenue Judgment Forbes Forbes Forbes Forbes Forbes Forbes Compbell Compbell Compbell Co. Co. Co. Ltd. Ltd. Ltd. Vs. Vs. Vs. Commissioner Commissioner Commissioner Income Income Income Tax Tax Tax reported reported reported [1994] [1994] [1994] 206206206 ITR ITR ITR

0495. 0495. 0495. In export inspection charges, brokerage, insurance, charges clearing charges entitled weighted deduction specific exclusion clause(III) Section 34B(1)(B) Income Act,1961. Following ruling, question Tax answered in the affirmative and in favour of the revenue. :8: d) As regards the Question No.4, Counsel agree that question relates "parking expenses exported" stands answered affirmative favour revenue judgment Vs. Sam Fashion Wear Pvt. Commissioner Income Tax reported [1994] ltd. 209 ITR

In view, however, question relates allowing weighted deduction foreign parties, question decided negative against revenue. In view, expenditure foreigners covered Section 35B(b)(a)(ix) pertains "such "such "such activities activities activities promotion promotion promotion sidesideside India India India prescribed". prescribed". prescribed". This supported Karnataka High Court CIT CIT CIT Vs. Vs. Vs. H.M.T.( H.M.T.( H.M.T.( International) International) International) Ltd. Ltd. Ltd. reported reported reported [1993] [1993] [1993] 203 203 203 ITR ITR ITR 573 573 573 Karnataka High Court expenditure incurred towards delegates complimentaries foreign expenditure a direct export activities assessee therefore, assessee entitled a weighted deduction U/s. 35B respect expenditure. In question relates allowing proportionate printing stationary printer direct telephone lines, view, expenditure merely normal business expenditure.

581.581. Following decision Apex Court, answer this question in the affirmative and in favour of the revenue. i) In view of answers as given hereinabove, the reference is disposed off with no order as to costs. (R.S.MOHITE, J.)

( F.I.REBELLO, J.)