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TMI Blog1985 (5) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses, the ld. CIT (A) has sustained the disallowance at 1/5th as attributable to the personal use of the vehicles by the assessee i.e. expenditure connected with non-business usage. As regards disallowance out of business promotion expenses, the ld. CIT (A) has held these expenses to be in the nature of entertainment expenditure, as such, hit by Explanation to s. 37(2A) of the Act as it stood inserted with retrospective effect from 1st April, 1976 by Finance Act, 1983. As regards disallowance of subscription, it has not been discussed by the ld. CIT (A) and so is the case with assessee's claim of depreciation (Rs. 717) regarding the assets written off. Disallowance out of car expenses stands sustained for the reasoning as in order dt.12th April, 1984made in the case of the assessee in relation to asst. yrs. 1974-75, 1975-76 and 1978-79. Disallowance out of business promotion expenses also stands sustained in view of legal position. Disallowance of subscription (Rs. 240) stands deleted and for this we rely upon our earlier order dt.12th April, 1984. As regards claim of depreciation amounting to Rs. 717, since it relates to a claim in lieu of assets written off, there is no rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is reproduced hereunder: "35B Export markets development allowance, (i) (a) Where an assessee, being a domestic company or a person (other than company) who is resident in India, has incurred after the 29th day of Feb., 1968, whether directly or in association with any other person, any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) referred to in cl. (b), he shall, subject to the provisions of this section, be allowed a deduction of a sum equal to one and one-third times the amount of such expenditure incurred during the previous year: Provided that in respect of the expenditure incurred after the 28th day of Feb., 1973 (but before the 1st day of April, 1978) by a domestic company, being a company in which the public are substance ially interested, the provisions of this clause shall have effect as if for the words "one and one-third times" the words "one and one-half times" had been substituted. (b) The expenditure referred to in cl. (a) is that incurred wholly and exclusively on (i) advertisement or publicity outsideIndiain respect of the goods, services or facilities which the assessee deals in or provides in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incurred after the 31st day of March, 1978, unless the following conditions are fulfilled, namely: (a) the assessee referred to in that sub-section is engaged in: (i) the business of export of goods and is either a small-scale exporter or a holder of an Export House Certificate; or (ii) the business of provision of technical know-how, or the rendering of services in connection with the provision of technical know-how, to persons outsideIndia; and (b) the expenditure referred to in that sub-section is incurred by the assessee wholly and exclusively for the purpose of the business referred to in sub-cl. (i) or, as the case may be, sub-cl. (ii) of cl. (a). Explanation: For the purpose of this sub-section, (a) "small-scale exporter" means a person who exports goods manufactured or produced in any small-scale industrial undertaking or undertakings owned by him: Provided that such person does not own any industrial undertaking which is not a small-scale industrial undertaking; (b) "Export House Certificate" means a valid Export House Certificate issued by the Chief Controller of Imports and Exports, Government of India; (c) "provision of technical know-how" has the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 (Del) of 1980 and 213 (Delhi) of 1981 relating to asst. yr. 1976-77 has had occasion to deal with the case of the same assessee's other business concern (Eastern Bulk Services) and vide orders of 5th Aug., 1983 observed as under: "4. the ld. counsel for the assessee has filed four separate paper-books The first paper comprises 83 pages and it, inter alia, contains the objections to draft assessment order filed before the IAC, directions of the IAC, copies of the ITO's order, grounds of appeal before the CIT (A), the submissions made before the CIT (A) and a copy of the order of the CIT (A). In the objections taken before the IAC vide letter dt.6th April, 1979. it is mentioned that the broker is supposed to render the following services, which entitled him to a commission payable by ship-owners: a. To locate tonnage/charterers. b. To negotiate and conclude a fixture. c. To compile terms of negotiations, obtain charterers and owner's approval and draft and finalise charter party duly signed by both parties. d. To advise and deliver this contract to all the parties concerned including port agents, suppliers, etc., and analyse terms, if required. e. To follow up ships's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and publicised to international connections relating to technical, commercial, contractual information and details of available cargoes for which suitable tonnage is solicited. (C) Specimen copies of telex messages relating to obtaining information regarding markets outside India for ships and charterers available, their technical description, places of availability, dates, etc., and other terms from various shipping centres of the world. (D) Specimen telex messages pertaining to obtaining information tonnages available for sale and purchase. (E) Specimen telex messages regarding obtaining information (commercial and technical) from world wide sources, pertaining to foreign ships and charterers over a period of one month. On the basis of the information furnished in the paper books, filed by the ld. counsel for the assessee, it was claimed that the expenditure incurred by the assessee was covered by the provisions of s. 35B (1) (b) (i), (ii) and (vi). A reference was made to the order of the Tribunal in the case of Capt. K. C. Saigal, pertaining to the asst. yr. 1973-74, wherein the expenditure involved was: (i) Telex charges for obtaining information regarding markets outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court and the said petition was dismissed by the Hon'ble Supreme Court (source : The Economic Times dt. 29th Sept. 1979). The order of the Tribunal in the aforesaid case was referred for purpose that though in the case of the assessee, there was not export of goods but all the same, the assessee was entitled to weighted deduction under s. 35B because it was promoting the export of such services and facilities which made the assessee entitled to weighted deduction under s. 35B. A reference was made to the Special Bench order of the Tribunal in the case of J. H. Co., and it was submitted that this judgment was not in any way against the assessee. It was specifically submitted that no part of the expenditure on which weighted deduction was claimed, was covered by sub-cl. (iii) of s. 35B(1)(b). 6. The ld. Departmental Representative submitted that the role of the assessee was only that of a professional negotiator and it was helpful in getting the fixture executed. According to him, before the fixture was executed, the assessee obtained this offer and communicated the same to the other party and after receiving the acceptance, the same was communicated to the concerned party and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation' derived their meaning from the words used in sub-cl. (vi) of s. 35B(1)(b). According to him, Expln. 2 to s. 35B was applicable to the facts of this case. He submitted that the assessee was not entitled to weighted deduction under s. 35B and, therefore, the orders of the Tribunal in the case of Capt. K. C. Saigal vs. ITO (IT Appeal Nos. 207A and 2545 (Del) of 1978-79 for the asst. yr. 1973-74, in the case of Global Chartoridg Services for the asst. yr. 1975-76 and in the case of Capt. K. C. Saigal vs. ITO (IT Appeal No. 2345 and 2952 (Del) of 1980 and 788 and 1036 (Del) of 1981 for the asst. yrs. 1976-77 and 1977-78), should not be followed. 7. In reply, the ld. counsel for the assessee submitted that the Expln. 2 to s. 35B was not applicable in this case. He submitted that market for advertisement will be the place where services will be utilised. He reiterated his earlier arguments that the assessee's case was covered by sub-cls. (i), (ii) and (vi) of s. 35B(1)(b) but also submitted that weighted deduction could also be claimed under sub-cl. (v) of s. 35(1)(b). He reitereted his submission that weighted deduction under s. 35B should be allowed to assessee. 8. We have ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after a 'fixture' is executed. It is true that some expenditure would be incurred when the fixture is but the claim of the assessee is that the time and money spent on a specific ship after the fixture is many times more than the time and money spend and cost of communication, etc. incurred to fix a ship and conclude a contract. The 'Post Fixture' service is intensive, continuous and demanding. We, thus, see no reason for denying the claim of the assessee for weighted deduction under s. 35B(1)(b). We, therefore, agree with the decisions of the Tribunal in the case of Global Chartering Services, Bombay Bench 'C' in the case of ITO v. J. B. Boda Marine General Survey Agencies (P) Ltd., in the case of Oceanic Shipping Agencies, in the case of Capt. K. C. Saigal, for the asst. yrs. 1976-77 to 1977-78. We do not agree with the order of the Tribunal in the case of Shiplinks." 12. The assessee claims to be dealing only with foreign ship owners and the total earnings are in foreign exchange and this contention of the assessee goes un-rebutted. The perusal of the documents relied upon by the assessee in the shape of paper-books placed on our file also corroborates the assessee's stand. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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