1991 (12) TMI 36 - HC - Income Tax

Summary

Issues:
Assessment of weighted deduction under section 35B of the Income-tax Act, 1961 for various expenditure items incurred by a partnership firm running a solvent plant exporting goods outside India.

Analysis:
The partnership firm claimed weighted deduction under section 35B for items like weight difference, quality allowance, dalali, quota slips, analysis charges, port godown rent, and kharajat expenses for different assessment years. The Income-tax Officer initially rejected the claims mainly on the ground that the expenditure incurred in India was not eligible for weighted deduction. The Commissioner of Income-tax (Appeals) partially allowed some claims, while rejecting others. On further appeal, the Tribunal allowed full weighted deduction for dalali expenses but rejected claims for other items like weight difference, quality allowance, quota slips, and godown rent.

Regarding weight difference and quality allowance, the court found that these differences in price due to weight or quality discrepancies did not qualify as expenditure for distribution, supply, or provision of exported goods. Therefore, weighted deduction was not allowed for these items. Similarly, expenses incurred for quota slips and godown rent, both in India, were also deemed ineligible for weighted deduction.

However, the court upheld the claim for weighted deduction on kharajat expenses to the extent of 10% only, rejecting the claim for the remaining 90% of the expenditure. The court found no evidence to support full weighted deduction for kharajat expenses.

Lastly, the court considered the expenditure incurred for analysis of exported goods. The analysis charges were found to be directly connected with the supply of goods and were incurred outside India. The court held that such analysis charges fell under the provision of section 35B(1)(b)(iii) and were eligible for weighted deduction. Therefore, the court allowed the claim for analysis charges while disallowing the rest of the expenditure items.

In conclusion, the court answered the referred question against the assessee for items other than analysis charges, and in favor of the Revenue for analysis charges. The partnership firm was entitled to weighted deduction only for the analysis charges incurred in the respective assessment years, with the rest of the claims being disallowed.