Deductions of service charges of State Trading Corporation of India u/s 35-B of Income Tax Act, 1961. - Income Tax - 1523/CBDT

INSTRUCTION NO. 1523/CBDT Dated: May 8, 1983 Section(s) Referred: 35B Statute: Income - Tax Act, 1961 Attention is invited to Board's Instruction No. 1487 (F. No. 202/6/82-ITA.II), dated 19th October, 1982, wherein it was clarified that the payments made to the State Trading Corporation of India in respect of service charges would qualify for deductions u/s 35-B of the Income-tax Act, 1961. 2. However, the Finance (No. 2) Act, 1980 with effect from 1st April, 1981 has deleted sub-clauses (ii), (iii), (v), (vi) (viii) of clause (b) of sub-clause (1) of section 35-B. Therefore, some of the services rendered by the State Trading Corporation of India would no longer be eligible for grant of weighted deduction. After the aforesaid amendment, only the following items would now qualify for deduction u/s 35-B of the Income-tax Act :- (i) Advertisement or publicity outside India in respect of the goods, services or facilities which the assessee deals in or provides in the course of his business; (ii) Maintenance outside India of a Branch, Office or agency for the promotion of sales outside India of such goods, services or facilities. (iii) Sending executives outside India for negotiating export contracts. (iv) Furnishing samples and technical informations for the promotion of exports. 3. With the amendment brought about in the Finance Act, 1980, it has become necessary to modify the Board's Instruction No. 1487 referred to above. 4. The matter was examined in consultation with the State Trading Corporation and it is further clarified that only 50% of such expenditure made by the assessees dealing in the export of Vegetable oil as service charges to the State Trading Corporation of India would only qualify for weighted deduction u/s 35-B of the Income-tax Act, subject to other conditions of this section being fulfilled, with effect from the assessment year 1980-81. 5. The above instructions may please be brought to the notice of the Officers working under you.