1998 (4) TMI 37 - HC - Income Tax

Summary

Issues:
1. Allowability of weighted deduction under section 35B for various expenses.
2. Applicability of Rule 6AA of the Income-tax Rules for the assessment year 1981-82.

Analysis:
1. The case involved the assessment year 1981-82 where the assessee, a manufacturer and exporter of hosiery clothes, claimed weighted deduction under section 35B of the Income-tax Act, 1961 for foreign travel expenses, agency commission, and interest commission. The Income-tax Officer allowed deduction for foreign travel expenses partially and disallowed the rest due to exceeding the approved period by the Reserve Bank of India. The agency commission claim was accepted, but interest and other expenses were disallowed. The Commissioner of Income-tax (Appeals) upheld the decision regarding interest and other expenses. The Tribunal ruled that interest charges were not eligible for deduction as the relevant section was deleted. The Tribunal also rejected the claim based on Rule 6AA, stating it was not retrospective.

2. The first issue was related to interest, commission, and foreign bank charges claimed under section 35B(1)(b)(iv). The court found that these expenses did not fall under the category of expenditure concerning maintenance outside India for the promotion of sales abroad, thus not eligible for weighted deduction. The court upheld the Tribunal's decision on this matter.

3. The second issue concerned the claim of Rs. 2,61,454 under section 35B(1)(b)(ix) based on Rule 6AA. The court analyzed the nature of expenses listed in Rule 6AA and found that the claimed expenses were general in nature and did not align with the specific categories outlined in the rule. Therefore, the court agreed with the Tribunal's decision that the assessee was not entitled to the weighted deduction under this section.

4. The third issue revolved around the applicability of Rule 6AA for the assessment year 1981-82. The court agreed with the Tribunal that Rule 6AA, which came into effect on August 1, 1981, was not applicable retrospectively to the assessment year in question. Citing a previous court decision, the court emphasized that the law applicable for the assessment year is the one in force on the first day of April of that year unless changed. Therefore, the court upheld the Tribunal's decision on this issue.

In conclusion, the court dismissed the tax case, stating that the assessee was not entitled to the claimed deductions under section 35B and that Rule 6AA was not applicable for the assessment year 1981-82.