1994 (8) TMI 12 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 35B for apportioning claim for assessment years 1976-77 and 1977-78.
2. Entitlement to full deduction under section 35B for expenditure related to export business.
3. Eligibility of commission on exports for relief under section 35B.
4. Disallowance of portion of export freight and shipping.

Analysis:

Issue 1:
The Tribunal considered the expenditure incurred by the assessee for export trade and found that full details were not provided. Therefore, the Tribunal estimated the eligible expenditure for weighted deduction under section 35B based on an estimate. It was observed that certain expenses, such as postage, packing, printing, and stationery, could not be entirely related to export activities but also to local activities connected with the establishment. The Tribunal adopted a method to allow 50% of the expenditure for 91% of export performance, resulting in the grant of relief under section 35B on an estimated basis.

Issue 2:
The assessee claimed that the entire relief under section 35B was related to export trade and should be allowed without any curtailment. However, the Revenue argued that certain expenses incurred in India, falling under specific clauses of section 35B(1), should be disallowed. The Tribunal found that the expenses covered not only export activities but also activities related to procurement, office running, and firm administration in India. Consequently, the Tribunal estimated the expenditure related to export trade and granted relief by allowing 50% of the claimed expenditure under section 35B.

Issue 3:
Regarding the commission on exports paid in India, the Tribunal determined that it was not directly related to export trade and, therefore, did not qualify for relief under section 35B. This decision was based on the specific nature of the expenditure and its connection to export activities.

Issue 4:
The Tribunal also addressed the disallowance of a portion of export freight and shipping expenses. By considering the nature of the expenses and their relation to export performance, the Tribunal allowed relief under section 35B on an estimated basis, granting partial deduction for the expenses claimed.

In conclusion, the Tribunal's decision to estimate the eligible expenditure for weighted deduction under section 35B based on the nature of the expenses and their connection to export activities was upheld. The judgment affirmed the Tribunal's approach of allowing relief on an estimated basis and answered the referred questions in favor of the Revenue.