1997 (7) TMI 74 - HC - Income Tax

Summary

Issues:
1. Whether separate assessments should be made for two periods due to a change in the constitution of the firm.
2. Whether the assessee is entitled to weighted deduction under section 35B for specific expenditures.

Analysis:

Issue 1:
The Tribunal considered whether separate assessments were required for two periods following the death of a partner and the continuation of the business by other partners. The assessing authority initially made a single assessment, citing a change in the firm's constitution. However, the AAC and the Tribunal held that two separate assessments were necessary. The Tribunal referred to a partnership deed clause preventing automatic dissolution upon a partner's death. Citing CIT vs. Shiv Shanker Lal Ram Nath, the Tribunal concluded that two separate assessments should be made due to the change in the firm's constitution. However, the High Court disagreed, citing the legal position under sections 187 and 188 of the IT Act, stating that only one assessment was required in cases where the firm continued after a partner's death.

Issue 2:
Regarding weighted deduction under section 35B, the Tribunal reviewed the expenditure claimed by the assessee for various items related to business activities, including advertisement, stationery, printing, and salaries. The ITO allowed deductions for specific expenses related to exports but disallowed others. The AAC upheld some disallowances but reduced others. The Tribunal, based on a previous year's decision, allowed the weighted deduction for expenses related to exports, emphasizing that the expenditure must be wholly and exclusively incurred for the promotion of exports. The High Court concurred with the Tribunal's decision on the allowability of weighted deductions, emphasizing that the expenditure need not be made abroad, but should be wholly and exclusively for export business promotion.

In conclusion, the High Court ruled in favor of the Revenue for questions 1 and 2, stating that only one assessment was required due to a change in the firm's constitution. Questions 3 and 4 were answered in favor of the assessee, affirming the entitlement to weighted deductions for specific expenditures related to export business promotion.