Deduction u/s 35B in light of Madras High Court decision in CIT v. Southern Seafood ltd. - Income Tax - 1624/CBDT

INSTRUCTION NO. 1624/CBDT Dated: June 5, 1985 Attention is invited to Board's Instruction No.1302(F.No.202/I/76-ITA-II) dated 29th January 1980 clarifying the admissibility or otherwise of certain expenses for the weighted deduction u/s.35 B of the I.T.Act. 2. In para (6) of the said Instruction it was mentioned that commission payments to a foreign and/or Indian agent would be entitled to weighted deduction provided such payments are in connection with the work and services specified in sub clauses (i) to (viii) of sec.35 B(1)(b) of the Act except to the extent referred to in sub-clause (iii) of clause (b) and is not in the nature of remission of a claim or trade discount. 3. Madras High court in the case of CIT Vs. Southern Sea Food (Pvt.) Ltd(1983) 140 ITR 855 held that commission paid to an agent in consideration of procuring orders by the agent for its principal cannot be covered for weighted deduction in any of the sub-clauses (ii),(iii), (iv) (viii) of section 35 B(1)(b) of the I.T. Act, 1961. 4. The Board desires that while deciding any claim for weighted deduction u/s.35 B of the I.T.Act in respect of such expenses the ratio laid down by the Madras High Court has to be kept in view. It must be ensured that the statutory conditions laid down in Sec.35 B(1)(b) are strictly fulfilled in respect of such claims. 5. The above clarification may kindly be brought to the notice of all the officers working in your charge.