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2004 (8) TMI 60 - HC - Income TaxWeighted deduction under section 35B - Whether Tribunal is right in law in upholding the order of the Commissioner of Income-tax (Appeals) allowing weighted deduction under section 35B, on various items of expenditure on proportionate basis without specifically relating the expenditure to any of the sub-clauses of section 35B(1)(b)? - Tribunal was totally unmindful of the various sub-clauses of section 35B(1)(b). Expenses can only be allowed if they are wholly and exclusively incurred for any of the purposes mentioned in these sub-clauses. Accordingly, we set aside the findings of the Tribunal on this issue and restore the matter to the Tribunal for fresh adjudication
Issues:
1. Interpretation of weighted deduction under section 35B of the Income-tax Act, 1961 without specific relation to sub-clauses. Analysis: The High Court was approached by the Revenue regarding the interpretation of weighted deduction under section 35B of the Income-tax Act, 1961, without specific relation to sub-clauses. The Tribunal had previously allowed the deduction based on an earlier order in the assessee's case for the assessment year 1976-77. However, subsequent judgments by the Supreme Court in CIT v. Stepwell Industries Ltd. and CIT v. Hero Cycles P. Ltd. clarified that weighted deduction can only be granted if the expenditure is wholly and exclusively incurred for the purposes mentioned in the sub-clauses of section 35B(1)(b) of the Act. The court noted that no such exercise had been undertaken in the previous assessments. Therefore, the matter needed fresh adjudication in line with the Supreme Court rulings. The court set aside the Tribunal's findings and remitted the matter for re-decision, emphasizing that the assessee must be given an opportunity to establish and justify its claim under the relevant sub-clauses of section 35B(1)(b) of the Act. In conclusion, the court answered the question referred to them in the negative, against the assessee and in favor of the Revenue, remitting the matter back to the Tribunal for fresh adjudication. The judgment highlighted the importance of specific relation to the sub-clauses of section 35B(1)(b) for granting weighted deduction under the Income-tax Act, 1961.
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