1979 (10) TMI 123 - AT - Income Tax

Summary

Issues:
1. Whether the salary paid to the Managing Director during his stay abroad qualifies for weighted deduction under section 35B.
2. Whether the assessee is entitled to deduction under section 80QQ calculated at 20% of the gross income from the publishing business.

Analysis:
1. The first issue in this appeal pertains to the eligibility of the salary paid to the Managing Director during his foreign tour for weighted deduction under section 35B. The Revenue contended that such salary does not qualify for the deduction as it was incurred in India, regardless of the Managing Director's location. The Commissioner (Appeals) allowed a proportionate deduction based on a Tribunal decision, considering it as a reasonable basis for weighted deduction. However, the Appellate Tribunal held that the Managing Director's salary cannot be considered wholly and exclusively incurred for export promotion activities, thus denying the deduction, and allowed the Revenue's ground.

2. The second issue revolves around the deduction under section 80QQ concerning profits from the publishing business. The assessee claimed a deduction at 20% of the income from publishing, while the Income Tax Officer (ITO) restricted it to 20% of the net profit after set-off of trading losses. The Commissioner (Appeals) referred to case law and held that the assessee was eligible for relief on the entire income from publishing, subject to limits under section 80A(2). The Appellate Tribunal disagreed with the Revenue's contention, citing a similar case regarding section 80T, and concluded that the deduction under section 80QQ should be allowed on the gross income before set-off of losses, provided the total deductions under Chapter VI-A do not exceed the gross total income. Consequently, the Tribunal rejected the Revenue's ground, partially allowing the appeal.

In conclusion, the Appellate Tribunal upheld the Revenue's ground regarding the Managing Director's salary but rejected the Revenue's contention on the deduction under section 80QQ, allowing relief on the gross income from the publishing business.