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Issues Involved:
1. Whether a claim for weighted deduction can be made by reference to sub-clause (ix) without a rule framed under "as may be prescribed." 2. Whether rule 6AA can be given retrospective operation from April 1, 1968. 3. Whether an assessee can claim weighted deduction under rule 6AA for inspection fees without maintaining its own inspection facilities. 4. Whether the claim can be considered under sub-clause (vi) if not admissible under sub-clause (ix). Issue-wise Detailed Analysis: Issue 1: Claim for Weighted Deduction Under Sub-clause (ix) The court examined whether a claim for weighted deduction could be made by reference to sub-clause (ix) of section 35B(1)(b) without a rule being framed under "as may be prescribed." The Tribunal had held that the rule, once framed, could govern pending assessments as it merely gave substance to an existing section in the statute. However, the court emphasized that the benefit under sub-clause (ix) was conditional on the activities being prescribed, and without such prescription, the sub-clause could not come into operation. Issue 2: Retrospective Operation of Rule 6AA The court addressed whether rule 6AA, effective from August 1, 1981, could be given retrospective effect from April 1, 1968. It was held that rule 6AA could not apply to claims before its enactment date. The court noted that Parliament did not intend for the rule to have retrospective effect, as it was not expressly stated. The court cited principles from Salmond on Jurisprudence and other cases to assert that substantive law, including tax deductions, cannot be retrospective unless explicitly stated. Therefore, rule 6AA was not retrospective in operation. Issue 3: Weighted Deduction for Inspection Fees Without Own Facilities The court considered whether an assessee could claim weighted deduction under rule 6AA for inspection fees paid to third parties without maintaining its own inspection facilities. The Tribunal had allowed the claim, but the court disagreed, stating that clause (c) of rule 6AA explicitly required the assessee to maintain its own laboratory or facilities for quality control or inspection. Thus, expenses paid to third-party agencies did not qualify for weighted deduction under this clause. Issue 4: Consideration Under Sub-clause (vi) The court briefly addressed whether the claim could be considered under sub-clause (vi) if not admissible under sub-clause (ix). It concluded that inspection fees did not amount to furnishing technical information for promoting sales outside India. Therefore, the expenses could not be considered under sub-clause (vi) either. Conclusion: The court held that the Tribunal was incorrect in applying rule 6AA retrospectively and allowing weighted deduction for inspection fees without the assessee maintaining its own inspection facilities. The question was answered in favor of the Revenue and against the assessee, with no order as to costs.
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