DECIDING AUTHORITY: Supreme Court
DATE OF JUDGMENT: 15/02/2000
BENCH: D.P.Wadhwa, S.S.M.Quadri
FACTS: The respondent-assessee is an Indian resident company. It is carrying on the business of exporting tea. In the aforementioned assessment years it claimed weighted deduction under Section 35-B of the Income-tax Act (for short the Act) in respect of the expenditure of Rs.1,95,935/- incurred on export of tea from East Africa to the United Kingdom. The claim was disallowed by the Income-tax Officer on the ground that Section 35-B would apply only if the exports were made from India. That view was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. Among others, the following two questions in Income Tax Reference No.242 1976 and question No.2. in Income Tax Reference No.10 of 1987 were referred to the High Court of Judicature at Bombay by the Income-tax Appellate Tribunal under Section 256(1) of the Act :
(1) Whether on the facts and in the circumstances of the case, the provisions of Section 40(c)(iii)/40(a)(v) applied in the case of the employees of the Assessee in its overseas branches?
(2) Whether on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction under Section 35-B in respect of the expenditure of Rs.1,95,935/- incurred on export of tea from East Africa to the United Kingdom?
JUDGEMENT: The first question was answered in the negative i.e. in favour of the assessee and against the Revenue following the judgment in the case of the respondent-assessee for the earlier assessment years in Bombay Burmah Trading Corporation Ltd. vs. Commissioner of Income Tax,Bombay City-IV [(1984) 145 ITR 793]. It is conceded by the learned counsel for the parties that this question is covered against the Revenue by the judgment of this Court in Commissioner of Income Tax vs. Continental Construction Ltd. [(1998) 230 ITR 485] affirming the judgment in Continental Construction Ltd. vs. Commissioner of Income Tax [(1990) 185 ITR 178]. Adverting to the second question, the High Court answered it in the affirmative i.e. in favour of the assessee and against the Revenue. It will be apt to refer to Section 35-B of the Act, which is the subject-matter of debate in all the five appeals.
On a plain reading of the provision of sub-section (1) of 35B, it is clear that to claim the benefit of this section the following conditions have to be satisfied : (i) the assessee must be a domestic company which is resident in India; (ii) it must have incurred expenditure after February 29, 1968 but before March 1, 1983; (iii) such expenditure should not be in the nature of capital expenditure or personal expenses of the assessee; (iv) the expenditure might have been incurred either directly or in association with any other person; and (v) the nature of the expenditure must answer the description referred to in any one of the sub-clauses of clause (b) On these requirements being satisfied the assesse company becomes entitled to the weighted deduction under Section 35-B. It is not necessary that the export should be directly ex-India (from India). The Tribunals reading of the section that the export should be ex-India is not supported by the language of the provision or any authority.
The High Court has, therefore, rightly concluded that to avail the benefit of weighted deduction the provision does not require that the export should be ex-India. It must be observed in fairness to Mr.M.L.Verma, learned senior counsel appearing for the Revenue, that he does not seriously dispute this proposition. Once this position is accepted, the order under challenge has to be sustained. However, what Mr.Verma contends is that the respondent claims the expenditure under sub-clause (viii) for which there is no factual finding by the Tribunal. The High Court, submits Mr. Verma, has gone wrong in recording a fresh finding the expenditure was incurred with regard to the performance of the service outside India i.e. from East Africa to United Kingdom in connection with the execution of contract for supply of tea in the United Kingdom — and on that basis upholding the claim of the respondent under Section 35-B; his further submission is neither the High Court nor this Court can do so without calling for a supplementary statement from the Tribunal on this aspect of the fact.
Mr.Ranjit Kumar, learned counsel appearing for the respondent- assessee company, invited our attention to the orders passed by the Income-Tax Officer, the Commissioner and the Tribunal and contended that there was no dispute with regard to the nature of the expenditure and therefore Mr.Vermas contention has to be rejected. We have perused the orders of the Income Tax Officer, the Commissioner, the Appellate Assistant Commissioner and the Tribunal as also the order under appeal passed by the High Court. Though a copy of the return containing details of the expenditure claimed by the respondent under the above provision has not been placed on record, the orders of the departmental authorities as well as of the Tribunal and of the High Court leave us in no doubt that the weighted deduction under Section 35-B was claimed in respect of the expenditure incurred with regard to the performance of the services outside India i.e. in East Africa and United Kingdom in connection with the execution of the contract for the supply of tea in the United Kingdom. Indeed, the said fact is embodied in question No.2 itself.
HELD: Appeal Dismissed.
By Tejasv Anand,IVth Year, Amity Law School, Delhi.
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