1984 (12) TMI 39 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner of Income-tax u/s 263.
2. Entitlement to weighted deduction u/s 35B(1)(b)(viii) of the Income-tax Act, 1961.

Summary:

Jurisdiction of the Commissioner of Income-tax u/s 263:
The assessee, a private limited company, filed a return declaring a loss and claimed weighted deduction u/s 35B. The Income-tax Officer allowed the weighted deduction. The Commissioner of Income-tax invoked u/s 263, arguing the assessment order was erroneous and prejudicial to the interests of the Revenue. The Tribunal overruled the preliminary objection regarding the Commissioner's jurisdiction, stating that the order was not passed under directions from the Inspecting Assistant Commissioner.

Entitlement to Weighted Deduction u/s 35B(1)(b)(viii):
The assessee claimed weighted deduction for expenses including interest paid to the Bank of Maharashtra on the export packing credit account. The Tribunal found that the assessee incurred these expenses for promoting export sales and that the expenditure was incidental to the performance of services outside India or in connection with the execution of any contract for supply outside India. The Tribunal relied on a certificate from the Bank of Maharashtra, which was not challenged by the Income-tax Officer or the Commissioner of Income-tax, confirming that the export packing credit loan was used exclusively for purchasing raw materials for manufacturing goods to be exported.

The Tribunal concluded that the assessee was entitled to the weighted deduction as the expenditure was incurred in connection with or incidental to the execution of contracts for supply outside India. The High Court agreed with the Tribunal, stating that the findings of fact based on the bank's certificate indicated that the expenditure was indeed incurred in connection with the execution of export contracts. The court emphasized that even incidental expenditure is covered under sub-clause (viii) of section 35B(1)(b).

Conclusion:
The High Court answered the reference in the negative, holding that the order of the Commissioner of Income-tax directing the Income-tax Officer to disallow the assessee's claim for weighted deduction was not correct, and the Tribunal was not in error in vacating it. The Tribunal's view was upheld, and parties were directed to bear their own costs.