1986 (2) TMI 41 - HC - Income Tax

Summary

Issues: Interpretation of section 35B of the Income-tax Act, 1961 regarding weighted deduction for storage expenses incurred by an exporting firm.

Analysis:
The case involved the interpretation of section 35B of the Income-tax Act, 1961, regarding the allowance of weighted deduction for storage expenses incurred by an exporting firm. The assessee, a registered firm engaged in exporting marine products, had claimed export markets development allowance under section 35B on storage expenses incurred outside India during the relevant accounting year. The Income-tax Officer disallowed the claim, but the Appellate Assistant Commissioner allowed it. The expenditure was divided into carriage of goods and storage expenses. The Income-tax Appellate Tribunal disallowed the deduction for carriage of goods but allowed it for storage expenses exceeding Rs. 1,95,818. The Revenue challenged the Tribunal's decision on the grounds that the expenditure was not localized under a specific sub-clause of section 35B(1) and that storage expenses were incidental to the carriage of goods.

The Tribunal found that the storage charges were for the agent's cold storage where sales were made on behalf of the assessee after goods reached their destination. The Tribunal distinguished storage expenses in transit from those incurred for distribution and supply outside India. It held that expenses incurred for storage and handling in the foreign agent's cold storage qualified for weighted deduction under section 35B(1)(b)(iii). The Tribunal's decision aligned with the principles established in previous cases, emphasizing that storage and handling charges outside India are expenses related to the distribution of goods outside India and thus eligible for weighted deduction.

The court upheld the Tribunal's decision, rejecting the Revenue's contentions. It concluded that the storage expenses incurred by the assessee for distribution and supply outside India qualified for weighted deduction under section 35B. The judgment favored the assessee, ruling against the Revenue. The court directed that a copy of the judgment be forwarded to the Income-tax Appellate Tribunal, Cochin Bench, with no order as to costs.