1989 (1) TMI 19 - HC - Income Tax

Summary

Issues:
1. Claim of weighted deduction under section 35B of the Income-tax Act for expenses incurred for maintenance of an export house.
2. Interpretation of circular issued by the Central Board of Direct Taxes dated December 28, 1981.
3. Applicability of previous court decisions and circulars to the current case.

Analysis:
The case involved a dispute between the Revenue as the applicant and the respondent-company, an income-tax assessee, regarding the claim of weighted deduction under section 35B of the Income-tax Act for expenses incurred for maintaining an export house during the assessment year 1976-77. The respondent-company, engaged in the manufacture of conductors, switch gears, and machinery, claimed a deduction of 50% of Rs. 1,62,924 for expenses related to the export house. The Income-tax Officer disallowed the claim, a decision upheld by the Commissioner of Income-tax (Appeals). However, the Income-tax Appellate Tribunal allowed the appeal filed by the respondent, citing the decision of a Special Bench in a similar case.

The main point of contention was whether the respondent was entitled to the weighted deduction of 50% for the export house expenses. The Revenue argued that the expenses were merely office expenditures and not eligible for the deduction, relying on a Division Bench decision. On the other hand, the respondent contended that they were entitled to the relief under section 35B of the Act based on a circular issued by the Central Board of Direct Taxes in 1981. The respondent claimed that the circular had substantially accepted the decision of the Special Bench, which supported their claim for the deduction.

The High Court, comprising Judges K. A. Nayar and K. S. Paripoornan, noted that the decision of the Special Bench and the circular in question were not presented before them. Due to the lack of crucial evidence, the court declined to answer the question referred by the Appellate Tribunal. Instead, the court directed the Tribunal to reconsider the appeal in light of the Special Bench decision and the circular from the Central Board of Direct Taxes. The Commissioner of Income-tax (Revenue) was instructed to provide the relevant circular to the Tribunal for further consideration.

In conclusion, the High Court refrained from providing a definitive answer to the legal question posed, emphasizing the need for a thorough review of the Special Bench decision and the circular by the Income-tax Appellate Tribunal for a fair adjudication of the case.