1988 (12) TMI 131 - AT - Income Tax

Summary

Issues:
1. Claim of weighted deduction under s.35B for Fumigation and Export Inspection Certificate charges.
2. Applicability of r. 6AA of IT Rules for deduction eligibility.
3. Maintenance of laboratory or facilities for quality control.
4. Merit of the case regarding quality control activities for export goods.

Detailed Analysis:
1. The appeal was filed against the CIT (A) order for the assessment year 1982-83, primarily concerning the claim of weighted deduction under s.35B for Fumigation and Export Inspection Certificate charges. The CIT (A) disallowed the claim stating that r. 6AA introduced in 1981 would not apply to the assessee's accounting year ending in June 1981. Additionally, the CIT (A) held that the expenses did not qualify as quality control under r. 6AA. The assessee contested this decision.

2. The Tribunal considered the applicability of r. 6AA in a previous case and held that it would apply only to assessment years commencing after its introduction or amendment. As the relevant assessment year was 1982-83 and r. 6AA was introduced in August 1981, the Tribunal accepted the assessee's claim for deduction under s.35B.

3. Regarding the maintenance of laboratory or quality control facilities, the assessee utilized government facilities instead of maintaining its own laboratory. Citing a previous case, the Tribunal determined that "maintenance" in this context meant continuing a relationship without the necessity of meeting expenses. Applying this principle, the Tribunal held that the assessee's arrangement with the government department constituted maintenance of laboratory for quality control, allowing the claim under r. 6AA.

4. The Tribunal examined the merit of the case and found that fumigation activities aimed at preventing decay of goods for export constituted quality control under r. 6AA. Similarly, expenses for export inspection charges were deemed eligible for deduction under s.35B. The Tribunal directed the ITO to recompute the relief under s.35 accordingly.

5. Ultimately, the appeal was allowed in favor of the assessee, granting the claim for weighted deduction under s.35B for both Fumigation and Export Inspection Certificate charges.