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Issues:
Claim of weighted deduction under section 35B for various expenses incurred by the assessee in the assessment year 1973-74. Analysis: The Appellate Tribunal ITAT BOMBAY-C heard cross appeals by the assessee and the revenue regarding the claim of weighted deduction under section 35B of the Income-tax Act, 1961 for expenses incurred by the assessee. The assessee, solely engaged in exporting textile goods, claimed expenses for commission, postage, travelling, sample charges, salary, sales promotion, and insurance. The Income Tax Officer (ITO) allowed deduction only for commission paid to foreigners. The assessee appealed, and the Additional Commissioner (AAC) considered specific expenses for deduction. The AAC allowed deduction for commission paid in India, sample charges, salary, and sales promotion expenses, excluding others. The Tribunal noted that the place of expenditure is irrelevant except for specific clauses of section 35B(1)(b). The Tribunal disagreed with the AAC's classification of expenses and directed further examination to determine eligibility for weighted deduction. The Tribunal found that travelling expenses incurred within India did not qualify for deduction as they were not related to foreign market activities. Expenditure on labels affixed to exported goods was also deemed ineligible for deduction as it did not constitute advertisement or publicity. However, charges paid to the Export Credit Guarantee Corporation were considered eligible as they were for obtaining information about foreign buyers and market creditworthiness. The Tribunal directed the ITO to reconsider the assessee's claim for other expenses debited to the profit and loss account based on the Tribunal's observations and the provisions of section 35B(1)(b). Regarding the department's appeal, the Tribunal upheld the weighted deduction for commission, sales promotion expenses, and salary and bonus. The Tribunal reasoned that commission payments facilitated sales through advertisement and publicity, making them eligible for deduction. Sales promotion expenses were allowed as they involved treating foreign buyers and providing market information. However, the Tribunal directed the ITO to reassess the salary and bonus expenses to determine their eligibility for weighted deduction under section 35B(1)(b). The matter was restored to the ITO for fresh disposal, allowing both appeals in part for statistical purposes.
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