9911796707
|
Home
Issues:
Interpretation of section 35B(1)(b)(iv) of the Income-tax Act, 1961 regarding weighted deduction for maintaining agency for promotion of sales outside India. Analysis: For the assessment year 1983-84, the Tribunal referred a question under section 256(2) of the Income-tax Act, 1961, regarding the entitlement of the assessee to weighted deduction under section 35B(1)(b)(iv) for maintaining agency for promotion of sales outside India. The assessee claimed weighted deduction for commission paid to foreign agents for promoting exports, including procuring and maintaining export business outside India. The Tribunal found that the assessee had six agents representing export territories, including the U.S.S.R., Oman, Kenya, Sri Lanka, and China. It was noted that the commission was paid outside India, which is a crucial factor in determining eligibility for weighted deduction under section 35B(1)(b)(iv). The court analyzed the relevant sub-clause (iv) of section 35B(1)(b), emphasizing that the expenditure must be incurred wholly and exclusively on maintaining an agency outside India for promoting sales outside India. It was clarified that the assessee can claim weighted deduction even if the promotion of sales is done through an agency, without the necessity of maintaining a branch or office outside India. Referring to legal principles from Halsbury's Laws of England, the court highlighted that the essence of an agency relationship is to act as an intermediary between two parties. The court emphasized that the expenditure incurred by the assessee for paying commission to foreign agents for promoting sales outside India qualifies as expenditure wholly and exclusively for the promotion of sales outside India through maintaining an agency abroad. The court cited decisions from the Calcutta High Court, Kerala High Court, and other cases supporting the view that weighted deduction can be claimed for maintaining agency for promotion of sales outside India. Based on the discussion and precedents, the court ruled in favor of the assessee, holding that the expenditure on commission to foreign agents for promoting exports constitutes expenditure eligible for weighted deduction under section 35B(1)(b)(iv). The judgment disposed of the reference in favor of the assessee, with no order as to costs.
|
