1989 (3) TMI 154 - AT - Income Tax

Agent Outside India, Assessing Officer, Assessment Year, Development Allowance, Industrial Undertaking, Profits And Gains, Setting Up, Weighted Deduction

Summary

Issues:
1. Claim of relief under sec. 35B on commission paid to Chemi Exports Kontours, G.M.B.H.
2. Claim of relief under section 80J on Universal Plant & Liquid Injectible Unit.

Analysis:

1. The first issue pertains to the claim of relief under sec. 35B on commission paid to Chemi Exports Kontours, G.M.B.H. The Department contended that the relief granted by the CIT(A) was unjustified, citing amendments to sec. 35B(1)(b) by the Finance Act, 1980. The Department argued that the commission payment did not align with maintaining an agency outside India as required by the statute. However, the assessee argued that the agency agreement, approved by the Reserve Bank of India, mandated various promotional activities beyond order procurement, thus fulfilling the conditions of sec. 35B(1)(b). The Tribunal, after considering precedents and the terms of the agreement, upheld the CIT(A)'s decision, stating that the payments were covered by sec. 35B(1)(b) and dismissing the Department's appeal.

2. The second issue revolves around the claim of relief under section 80J concerning the Universal Plant & Liquid Injectible Unit. The Departmental Representative contended that the Universal Plant Unit was solely financed by bank borrowings, thus not qualifying for relief under sec. 80J. The assessee argued that the profits generated were sufficient to justify the investment in the new unit, considering the increase in borrowings matched by current assets. The Tribunal emphasized the liberal interpretation of incentive provisions like sec. 80J, citing legal precedents. The CIT(A)'s decision to grant relief for the Liquid Injectible Unit was supported by the Saurashtra Cement & Chemical Industries Ltd. case, emphasizing that once relief is granted, it cannot be withdrawn without valid grounds. The Tribunal upheld the CIT(A)'s findings on both units, emphasizing the need for a liberal interpretation of incentive provisions and supporting legal precedents.

In conclusion, the Tribunal upheld the decisions of the CIT(A) on both issues, emphasizing the need for a liberal interpretation of tax incentive provisions and relying on legal precedents to support its findings.