1985 (5) TMI 95 - AT - Income Tax

Issues Involved:
1. Disallowances out of car expenses, business promotion expenses, and subscription.
2. Claim of depreciation regarding assets written off.
3. Applicability of provisions of Section 145 of the Income Tax Act.
4. Eligibility for weighted deduction under Section 35B of the Income Tax Act.

Detailed Analysis:

1. Disallowances out of Car Expenses, Business Promotion Expenses, and Subscription:
The assessee's grievances include disallowances out of car expenses (Rs. 3,244), business promotion expenses (Rs. 2,547), and subscription (Rs. 240). The CIT (A) sustained the disallowance of 1/5th of the car expenses attributable to personal use. The business promotion expenses were deemed entertainment expenditure, thus disallowed under Explanation to Section 37(2A) of the Act, effective retrospectively from April 1, 1976. The disallowance of subscription was not addressed by the CIT (A). The Tribunal upheld the disallowance of car expenses and business promotion expenses based on previous orders but deleted the disallowance of subscription (Rs. 240), relying on an earlier order dated April 12, 1984.

2. Claim of Depreciation Regarding Assets Written Off:
The assessee's claim for depreciation (Rs. 717) on assets written off was not addressed by the CIT (A). The Tribunal reviewed the details and found the items involved to be minor, thus deleting the disallowance. The assessee succeeded on this issue.

3. Applicability of Provisions of Section 145 of the Income Tax Act:
The Revenue contended that the provisions of Section 145 should apply as the correct income could not be deduced from the assessee's accounts. The Tribunal dismissed this ground, referencing earlier orders for the assessment years 1974-75, 1975-76, and 1978-79.

4. Eligibility for Weighted Deduction under Section 35B of the Income Tax Act:
The Revenue challenged the CIT (A)'s decision that the assessee was eligible for weighted deduction under Section 35B. The Tribunal examined whether the assessee's business activities merited this deduction under the amended Section 35B. The assessee claimed eligibility under Section 35B(1A)(a)(ii), asserting engagement in the provision of technical know-how. The Tribunal referred to the definition of "provision of technical know-how" under Section 80MM(2), which includes imparting information concerning industrial, commercial, or scientific knowledge, experience, or skill.

The Tribunal reviewed the Special Bench decision in the case of M/s Eastern Bulk Services, which outlined the services provided by brokers, including locating tonnage/charterers, negotiating fixtures, and providing continuous post-fixture services. The Tribunal agreed that these activities involved significant technical and commercial information exchange, justifying the weighted deduction under Section 35B(1)(b)(i), (ii), and (vi).

The Tribunal also noted that the assessee's earnings in foreign exchange from dealing with foreign ship owners were unchallenged. The Tribunal concluded that the assessee's activities fit within the definition of "provision of technical know-how," thereby entitling the assessee to the weighted deduction. The Tribunal dismissed the Revenue's appeal on this ground, referencing supportive case law, including decisions from the Delhi High Court.

Conclusion:
The Tribunal allowed the assessee's appeal in part, specifically on the issues of subscription and depreciation claims. The Revenue's appeal was dismissed entirely, upholding the CIT (A)'s decision on the non-applicability of Section 145 and the eligibility for weighted deduction under Section 35B.

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