1991 (12) TMI 28 - HC - Income Tax

Summary

Issues:
Whether the expenses incurred for carriage and insurance of goods exported by a partnership firm are entitled to weighted deduction under section 35B of the Income-tax Act, 1961 for the assessment years 1974-75, 1975-76, and 1976-77.

Detailed Analysis:
The judgment pertains to a registered partnership firm engaged in manufacturing hair oils and perfumes, including exporting goods outside India. The firm incurred expenses for carriage and insurance of the exported goods in the relevant assessment years. The firm did not initially claim weighted deduction under section 35B of the Income-tax Act during the assessment process. However, upon appeal before the Appellate Assistant Commissioner, the firm pressed for these claims, which were allowed by the Commissioner but challenged by the Revenue before the Income-tax Appellate Tribunal.

The primary issue revolves around the interpretation of section 35B(1) of the Income-tax Act, which provides for export markets development allowance. The section allows a deduction for certain expenditures incurred by an assessee, subject to specified conditions. The critical clause in question is 35B(1)(b)(iii), which excludes certain expenditures from being considered for weighted deduction, specifically those related to the carriage and insurance of goods exported.

The court referenced a previous judgment by the Madhya Pradesh High Court, which extensively analyzed the legislative intent behind the relevant clause. The court concurred with the Madhya Pradesh High Court's interpretation, emphasizing that expenditures on the carriage and insurance of goods for export cannot be considered for weighted deduction under section 35B. This interpretation aligns with the exclusionary language of the statute and the intent behind the provision.

Ultimately, the court upheld the Tribunal's decision, denying the partnership firm's claim for weighted deduction on the expenses incurred for carriage and insurance of the exported goods. The court answered both questions referred to it in the affirmative, ruling against the assessee. The judgment concludes with the reference being answered accordingly, with no order as to costs.

In summary, the court's decision clarifies the scope of deductions under section 35B of the Income-tax Act concerning expenses related to the carriage and insurance of exported goods, affirming that such expenditures do not qualify for weighted deduction.