1997 (3) TMI 19 - HC - Income Tax

Summary

Issues:
Claim for weighted deduction under section 35B of the Income-tax Act, 1961 for various expenditure items incurred by the assessee during assessment years 1976-77, 1977-78, and 1978-79.

Analysis:
The assessee claimed weighted deduction under section 35B of the Income-tax Act for expenditure items like railway freight, air freight, insurance, exchange fluctuation, interest, and rent and lighting incurred during the assessment years in question. The Income-tax Officer rejected the claim on the basis that the expenditure was incurred in India, thus not qualifying for weighted deduction. The Commissioner of Income-tax (Appeals) allowed deduction only for expenditure related to the export market and disallowed the rest. The Appellate Tribunal further disallowed the claim for railway freight, air freight, insurance, exchange fluctuation, interest, and rent and lighting, citing statutory provisions and previous court decisions.

The High Court upheld the Tribunal's decision, stating that the assessee was not eligible for weighted deduction for railway freight, air freight, and insurance due to a specific statutory bar in section 35B(1)(b)(iii) of the Act. The court agreed that exchange fluctuation expenditure did not fall under the enumerated items for deduction and was considered a normal business expenditure, not specific to export marketing. Additionally, interest paid to the bank for borrowed capital and rent and lighting for the factory building were also deemed ineligible for weighted deduction as they were not categorized as export marketing expenses under section 35B of the Act.

The court referred to previous judgments to support its decision, emphasizing that interest paid to the bank for business purposes and manufacturing expenses could not be considered as export marketing expenditures eligible for weighted deduction. The court concluded that the assessee failed to provide evidence that the expenditure was related to items specified in section 35B of the Act, leading to the rejection of the claim for weighted deduction for all the mentioned expenditure items. Consequently, the court ruled against the assessee, affirming the Tribunal's decision and denying the claim for weighted deduction for the assessment years in question.