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Issues involved: Interpretation of weighted deduction under section 35B of the Income Tax Act, 1961 based on expenses incurred for export activities.
Judgment Summary: The case involved a public limited company engaged in manufacturing ferro manganese and another company exporting wire ropes, both claiming weighted deduction under section 35B of the Income Tax Act, 1961 for expenses incurred in their export activities. The dispute arose when the Department challenged the allowance of certain expenses claimed by the companies. The Tribunal constituted a Special Bench to resolve the inconsistencies in the interpretation of section 35B by different benches. The Special Bench's ruling conflicted with a previous High Court ruling, causing uncertainty for the petitioners. The High Court ruling held that weighted deduction could be claimed for expenses incurred both inside and outside India, as long as they pertained to the purposes specified in the Act. However, the Special Bench ruling contradicted this by disallowing certain expenses claimed by the petitioners. The petitioners, fearing adverse implications of the Special Bench ruling, approached the High Court seeking clarity and consistency in the application of section 35B. The High Court acknowledged the conflict between the two rulings and emphasized the importance of legal certainty and adherence to judicial decisions. It directed the Department to consider both the High Court ruling and the Special Bench ruling while deciding the petitioners' assessment proceedings. The High Court reaffirmed that its judgment would prevail over the Tribunal's ruling on questions covered by the High Court ruling, ensuring uniformity in tax assessments within the State of Maharashtra. In conclusion, the High Court allowed the petition, instructing the Department to expedite the petitioners' assessment proceedings in accordance with the judgment. The stay on recovery proceedings was lifted, and each party was directed to bear their own costs for the petition.
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