1987 (2) TMI 45 - HC - Income Tax

Summary

Issues Involved: The judgment involves questions regarding entitlement to weighted deduction under section 35B(1)(b) of the Income-tax Act, 1961, services rendered by an agent in connection with distribution of goods, and deduction in respect of provision made for payment of leave with wages.

Entitlement to Weighted Deduction u/s 35B(1)(b): The assessee claimed weighted deduction under sections 35B(1)(b)(iii) and (viii) for expenses incurred in connection with goods exported to the U.S.S.R. The Income-tax Officer disallowed the claims as the amounts were paid in India, considering it as expenditure incurred in India. The Appellate Assistant Commissioner disallowed claims under certain sub-clauses but allowed others. The Tribunal allowed claims under sub-clauses (i) and (ii) of clause (b) of sub-section (1) of section 35B based on a standard form of contract. The High Court held that the assessee failed to prove expenses were incurred outside India for specified activities, emphasizing that payment in India does not disqualify if expenditure was incurred abroad.

Services Rendered by Agent for Distribution of Goods: The Tribunal erred in allowing claims solely based on commission paid to the agent without verifying if expenses were incurred outside India. The High Court emphasized that the burden is on the assessee to prove expenses were for specified activities conducted abroad. The Tribunal's decision lacked evidence and misdirected itself, leading to a conclusion without proper verification. The High Court ruled in favor of the Revenue, highlighting the necessity for the assessee to establish expenses were incurred outside India for activities specified under section 35B.

Deduction for Provision of Leave with Wages: In light of a previous court decision, the High Court ruled in favor of the assessee regarding the deduction for the provision made for payment of leave with wages. The decision was made in favor of the assessee and against the Revenue.

Conclusion: The High Court answered questions 1 to 3 in favor of the Revenue and against the assessee, emphasizing the importance of proving expenses were incurred outside India for specified activities to claim weighted deduction under section 35B. The parties were directed to bear their respective costs, and a copy of the judgment was to be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.