9911796707
|
Home
Issues:
Claim of weighted deduction under section 35B of the Income-tax Act, 1961 for expenditure incurred in rendering services to a foreign buyer outside India in connection with export of goods. Analysis: The case involved a private limited company engaged in the business of manufacturing and selling wool, as well as exporting groundnuts known as H.P.S. The company claimed weighted deduction under section 35B of the Income-tax Act, 1961 for expenditure incurred in providing a credit facility to a foreign buyer in connection with the export of goods. The foreign buyer was unable to make payment on presentation of documents due to credit squeeze and dear money position, resulting in the company incurring an expenditure of Rs. 2,26,093 in rendering services to the buyer outside India. The Income-tax Officer rejected the claim, stating the expenditure was incurred in India. The Commissioner of Income-tax (Appeals) and the Tribunal also held that the expenditure did not qualify for weighted deduction as it was not connected to any activity related to exports. The Tribunal referred the question to the High Court, seeking clarification on the eligibility of the expenditure for weighted deduction. In the contract of export, the foreign buyer required payment for the goods supplied to be made only upon the arrival of the steamer, instead of on retirement of documents as per the usual practice. The company agreed to this condition, resulting in an expenditure of Rs. 2,26,093 paid to the bank as interest or service charges. The High Court analyzed whether this expenditure fell under sub-clause (viii) of section 35B(1)(b), which allows weighted deduction for expenditure incurred on services performed outside India in connection with the execution of a contract for the supply of goods outside India. The Court noted that the company did not perform any services outside India for the buyer, as the payment arrangement was a part of the contract terms and not a separate service provided by the company. Therefore, the Court concurred with the Tribunal's decision that the expenditure did not qualify for weighted deduction under section 35B(1) of the Act. In conclusion, the High Court affirmed the decision of the Tribunal and the authorities below, ruling that the expenditure incurred by the company in providing a credit facility to the foreign buyer did not meet the criteria for weighted deduction under section 35B(1) of the Income-tax Act, 1961. The Court answered the referred question in the affirmative, against the assessee, with no order as to costs.
|
