1976 (6) TMI 38 - AT - Income Tax

Summary

Issues:
1. Claim of relief under section 35B of the Income Tax Act for commission paid to foreign correspondents.
2. Failure of the Appellate Assistant Commissioner (AAC) to specify the particular sub-section of section 35(1)(b) under which the claim was allowed.
3. Disallowance of payment made locally under section 35B(1)(b)(iii) of the Act.
4. Determination of eligibility for relief under section 35B(1)(b)(ii) or 35B(1)(b)(v) based on the work done by the correspondents.

Analysis:
1. The judgment involves the consolidation of two departmental appeals concerning the claim of relief under section 35B of the Income Tax Act for commission paid to foreign correspondents by the assessee engaged in the business of coir mats and mattings, including export activities. The Income Tax Officer (ITO) initially refused the claim, but the AAC allowed it for both assessment years, leading to the appeals by the Department.

2. The issue raised was the failure of the AAC to specify the particular sub-section of section 35(1)(b) under which the claim for relief was admissible. Although the specific sub-section was not mentioned in the appellate order, it was inferred that the claim was allowed under section 35B(i)(b)(ii) or 35B(i)(b)(v) based on the nature of the expenses claimed.

3. The Department contended that the payment made locally was a bar only if the case fell under section 35B(1)(b)(iii) of the Act. However, it was argued that if the case fell under section 35B(1)(b)(ii) or 35B(1)(b)(v), payment in India would not be a hindrance to the claim. The judgment highlighted that the eligibility for relief depended on the specific sub-section under which the claim was made.

4. The decision revolved around the eligibility of the claim under section 35B(1)(b)(ii) or 35B(1)(b)(v) based on the work performed by the foreign correspondents. The judgment emphasized that the correspondents were engaged in obtaining information regarding markets outside India and in the preparation and submission of tenders for supplies outside India, which aligned with the requirements for relief under the specified sections. The court found that the work done by the correspondents was adequately presented to the ITO, justifying the allowance of the claim by the AAC and dismissing the appeals.

In conclusion, the judgment upheld the decision of the AAC to allow the claim for relief under section 35B for the commission paid to foreign correspondents based on the nature of work performed by them, which aligned with the provisions of section 35B(1)(b)(ii) or 35B(1)(b)(v).