9911796707
|
Home
Issues Involved:
1. Allowance of weighted deduction under section 35B of the Income-tax Act, 1961, with regard to export duty. Detailed Analysis: Allowance of Weighted Deduction under Section 35B: Background: The primary issue revolves around whether the assessee is entitled to a weighted deduction under section 35B of the Income-tax Act, 1961, for the export duty paid amounting to Rs. 1,34,29,740. The Income-tax Officer (ITO) denied this deduction, stating that the export duty paid by the assessee-company was not connected with any agreement or contract with the foreign buyer but represented its selling price in India. Contentions Before Commissioner (Appeals): The assessee argued that the export duty was paid at the point of shipment and not at the time of signing the contract with the Coffee Board. Thus, it was an expenditure incurred in connection with or incidental to the supply of goods outside India. The Commissioner (Appeals) agreed with the assessee, stating that the duty was paid just before the commodity left the shores of India and was directly connected with the export of coffee. Consequently, the Commissioner (Appeals) directed the ITO to allow the weighted deduction. Revenue's Appeal: The revenue contended that the assessee had not objected to the denial of relief under section 35B regarding export duty during the proceedings under section 144B of the Act. However, this ground was not included in the grounds of appeal filed by the revenue. The Tribunal held that the Commissioner (Appeals) was justified in entertaining this ground. Arguments by Standing Counsel for the Revenue: The standing counsel argued that the claim before the ITO was under section 35B(1)(b)(viii), but before the Commissioner (Appeals), it was under both sub-clauses (iii) and (viii). He asserted that the expenditure on export duty could not be equated with that incurred in the performance of services outside India and could not be allowed under sub-clause (iii) since it was an expenditure incurred in India. The Karnataka High Court's decision in Ullal Narayana Mallya & Sons's case was cited, which held that sub-clause (viii) would apply only to after-sale services outside India. Arguments by Counsel for the Assessee: The assessee's counsel argued that the export duty was not covered by the Karnataka High Court judgment and cited the Bombay High Court's questioning of the correctness of a Special Bench decision. He maintained that the export duty was paid in connection with the execution of the contract for the supply of goods outside India and was not part of the cost of goods. The expenditure was for facilitating the supply of goods outside India and should be treated on par with other similar expenditures. Tribunal's Decision: The Tribunal did not find it necessary to constitute a Special Bench for resolving the dispute. It observed that the argument that export duty paid was an expenditure incurred wholly and exclusively in connection with or incidental to the execution of any contract for supply outside India was fallacious. The Tribunal emphasized that export duty is an expenditure incurred in India and does not qualify for weighted deduction under section 35B(1)(b)(iii) or (viii). The Tribunal referred to the Karnataka High Court's detailed explanation in Ullal Narayana Mallya & Sons's case, which clarified that sub-clause (viii) pertains to after-sales services outside India and not to expenditures like export duty. Conclusion: The Tribunal concluded that export duty cannot be considered as expenditure incurred in connection with or incidental to the execution of any contract for the supply outside India of coffee. Consequently, the Tribunal reversed the order of the Commissioner (Appeals) and denied the weighted deduction on export duty.
|
