1992 (11) TMI 33 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 35B for weighted deduction on expenses incurred on delegation, export promotion, and complimentary articles.
2. Determining if expenditure incurred within India is eligible for weighted deduction under section 35B.
3. Comparison of relevant case laws to support the assessee's claim for weighted deduction.

Detailed Analysis:
1. The judgment dealt with the interpretation of section 35B for weighted deduction on expenses related to delegation, export promotion, and complimentary articles. The assessee, engaged in export, claimed weighted deduction for expenses on foreign delegates and complimentary articles. The Commissioner of Income-tax (Appeals) accepted the claim, which was further confirmed by the Appellate Tribunal. The crux of the issue was whether such expenses qualified for weighted deduction under section 35B.

2. The main contention revolved around whether expenditure incurred within India could be eligible for weighted deduction under section 35B. The Revenue argued that only expenses incurred outside India could qualify. However, the assessee relied on section 35B(1)(a) and (b)(ii) which allowed expenditure on obtaining information regarding markets outside India for goods. The court analyzed various sub-clauses of section 35B to determine the eligibility criteria for weighted deduction based on the location of expenditure.

3. The judgment extensively compared and contrasted relevant case laws to support the assessee's claim for weighted deduction. The Madras High Court's decision in V. D. Swami and Co. Pvt. Ltd. case was discussed, emphasizing the exclusion of expenditure incurred in India for weighted deduction. However, other judgments such as CIT v. Bata India Ltd. and Handicrafts and Handloom Export Corporation of India v. CIT were cited to highlight instances where expenditure incurred in India for export promotion activities was considered eligible for weighted deduction under section 35B. The court concluded that if there was a direct nexus between the expenditure and export promotion activities, the expenditure would be entitled to weighted deduction.

In conclusion, the court ruled in favor of the assessee, affirming that the expenditure on foreign delegates had a direct nexus to the export activities, making it eligible for weighted deduction under section 35B. The judgment highlighted the importance of a direct correlation between expenditure and export promotion activities for claiming weighted deduction, despite the location of expenditure.