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Issues:
1. Whether commission paid to State Trading Corporation qualifies for weighted deduction under section 35B of the Income-tax Act, 1961. 2. Whether commission paid to local agents of foreign buyers and insurance premium paid to the Export Credit Guarantee Corporation qualify for weighted deduction under section 35B of the Income-tax Act, 1961. Analysis: The judgment delivered by the High Court of Madras involved a reference made by the Tribunal under section 256(2) of the Income-tax Act, 1961 regarding the eligibility of certain payments for weighted deduction under section 35B of the Act. The first issue pertained to the commission paid to the State Trading Corporation. The court noted that the department did not press this question, and thus, it remained unanswered. Moving on to the second issue, the court divided it into two parts: commission paid to local agents of foreign buyers and insurance premium paid to the Export Credit Guarantee Corporation. In addressing the second part of the second question concerning the insurance premium, the court relied on a previous decision and held that the premium paid to the Export Credit Guarantee Corporation would indeed qualify for weighted deduction under section 35B of the Act. This part of the question was answered in the affirmative against the Department. Regarding the first part of the second question related to commission paid to local agents of foreign buyers, the court considered the nature of services provided by the agents. The court observed that the commission payment to Indian agents of foreign buyers was an expenditure exclusively incurred on advertisement or publicity outside India and obtaining information regarding the market outside India for such goods. The court referred to a previous judgment and concluded that the assessee was entitled to weighted deduction under section 35B of the Act for the commission payment made to the local agents of foreign buyers, irrespective of the payment being made in India. The court found no infirmity in the Tribunal's order on this aspect and answered the first part of the second question in the affirmative against the Department. The judgment provided a detailed analysis of the services rendered by the local agents and the legal basis for allowing weighted deduction in this scenario.
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