1980 (8) TMI 113 - AT - Income Tax

Summary

Issues:
1. Disallowance of subscription paid to Employees' Union under miscellaneous expenses.
2. Allowance of weighted deduction under section 35B of the IT Act.
3. Claim of loss due to currency fluctuations for weighted deduction under section 35B.

Issue 1: Disallowance of subscription paid to Employees' Union:
The assessee, a firm engaged in manufacturing and exporting foot-balls, claimed subscription paid to the Employees' Union of a bank as a business expense. The Income Tax Officer (ITO) disallowed the claim, stating it was not incurred in connection with the business. The Appellate Tribunal held that the subscription was for maintaining good relations with bank employees, necessary for business dealings, and allowed the deduction, overturning the AAC's decision.

Issue 2: Allowance of weighted deduction under section 35B:
The dispute revolved around the allocation of expenses for export purposes under section 35B. The ITO allowed only a portion of the claimed expenditure for weighted deduction. The Appellate Tribunal found that the AAC incorrectly restricted the deduction for certain expenses, such as legal charges, and directed the full allowance as per the ITO's decision. Additionally, the Tribunal adjusted the allocation of expenses based on the ratio of export sales to local sales, allowing a higher deduction under section 35B.

Issue 3: Claim of loss due to currency fluctuations for weighted deduction:
The assessee claimed a loss due to currency fluctuations for weighted deduction under section 35B. The ITO and AAC rejected the claim, stating it was not covered under the specified provisions. The Appellate Tribunal upheld this decision, ruling that losses from currency fluctuations were not eligible for weighted deduction under section 35B, as they were not listed as allowable expenses. The Tribunal dismissed the Department's appeal challenging the expenses allowed by the AAC.

In conclusion, the Appellate Tribunal partially allowed the assessee's appeal, directing the full allowance of certain expenses under section 35B, adjusted based on the sales ratio, while dismissing the Department's appeal and the cross objection filed by the assessee.