1979 (1) TMI 123 - AT - Income Tax

Issues:
1. Jurisdiction to reopen assessment under section 147(b) of the IT Act, 1961.
2. Disallowance of weighted deduction on specific items of expenditure.
3. Direction to allow weighted deduction on commission payments to foreign agents.
4. Disallowance of weighted deduction on salaries paid to staff of Export Department.

Analysis:
1. The judgment deals with an appeal related to the re-assessment made for the year 1971-72 under section 143(3) read with section 147(b) of the IT Act, 1961. The original assessment allowed weighted deduction under section 35B on certain items of expenditure, but the assessment was reopened by the ITO based on an audit objection. The appellant contended that the reassessment was not justified as it was a mere change of opinion by the ITO. However, the Tribunal upheld the reassessment, citing the Supreme Court decision in the case of Kastur Bhai Lalbhai, which supported the reopening based on audit objections. Therefore, the Tribunal rejected the appellant's objection regarding the jurisdiction of the ITO to reopen the assessment.

2. Regarding the disallowance of weighted deduction on specific items of expenditure, the Tribunal considered the claim for weighted deduction on bank charges, E.C.G.C. premium, postage, and bank commission. The Tribunal rejected the claim for bank charges and bank commission based on a Special Bench decision, which deemed them ineligible for weighted deduction. However, the Tribunal allowed the claim for postage and E.C.G.C. premium as eligible for weighted deduction. The Tribunal noted that the postage amount of Rs. 20,000 was estimated for communications outside India, and the total postage incurred was Rs. 70,352.

3. The Tribunal addressed the direction to allow weighted deduction on commission payments to foreign agents. The appellant objected to the AAC's direction, claiming that all payments were made to foreign agents. However, the Tribunal found no evidence to support the appellant's claim that some payments were made to actual importers. As a result, the Tribunal dismissed the appellant's objection, ruling that the weighted deduction should be allowed on commission payments made to foreign agents.

4. Lastly, the Tribunal discussed the disallowance of weighted deduction on salaries paid to staff of the Export Department. The AAC had held the payment ineligible for weighted deduction under section 35(1)(b)(iii). However, the Tribunal referred to a Special Bench order supporting the appellant's claim. The Tribunal estimated that 20% of the expenses could be attributed to excluded activities under section 35B(1)(b)(iii) and allowed weighted deduction on the remaining 80% of the amount claimed. Consequently, the Tribunal partially allowed the appeal, directing the allowance of weighted deduction on the specified amount of salaries paid to the staff of the Export Department.

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