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TMI Blog1992 (4) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... m for relief under section 80-0 was negatived and in the appeal preferred by the assessee and alternative claim for relief in terms of section 35B was set up. The CIT (Appeals) upheld the Assessing Officer's finding that the assessee was not entitled to exemption under section 80-0 of the Act. He held that the assessee could be entitled to some relief under section 80HHB and restored the matter to the Assessing Officer for examining whether the assessee deserved any relief under that section. The CIT (Appeals) also restored the matter regarding the claim of the assessee for weighted deduction under section 35B to the ITO directing the Assessing Officer to examine the assessee's claim and allow weighted deduction to the extent admissible in accordance with law. Thereafter the Assessing Officer examined the matter and passed an order dated27-9-1985negativing the assessee's claim. The Assessing Officer held that since the assessee was engaged in the execution, of a foreign project of civil construction there was no sale of goods as held by the Hon'ble Supreme Court in the case of State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. AIR 1958 SC 560, and, therefore, the expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred by an assessee during the previous year. The expenditure on which weighted deduction was allowable was specified in sub-clauses (i) to (ix) of sub-clause (b) of section 35B(1), which are reproduced below :--- " (b) The expenditure referred to in clause (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 the course of his business ; (ii) obtaining information regarding markets outsideIndiafor such goods, services or facilities ; (iii) distribution, supply or provision outside India of such goods, services or facilities, not being expenditure incurred in India in connection therewith or expenditure (wherever incurred) on the carriage of such goods to their destination outside India or on the insurance of such goods while in transit ; (iv) maintenance outsideIndiaof a branch, office or agency for the promotion of the sale outsideIndiaof such goods, services or facilities ; (v) preparation and submission of tenders for the supply or provision outsideIndiaof such goods, services or facilities, and activities incidental thereto ; (vi) furnishin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that there was no such sale and this view was upheld by the Hon'ble Supreme Court. The Hon'ble Supreme Court observed as below :--- " In a building contract, the agreement between the parties is that the contractor should construct a building according to the specifications contained in the agreement, and in consideration therefor receive payment as provided therein, and as will presently be shown there is in such an agreement neither a contract to sell the materials used in the construction, nor does property pass therein as movables. It is, therefore impossible to maintain that there is implicit in a building contract a sale of materials as understood in law." 6. The learned counsel for the assessee also referred to the Hon'ble Supreme Court's judgment dated 15-1-1992 in the assessee's own case, i.e., Continental Construction Ltd. v. CIT [Civil Appeal No. 3458 of 1990], wherein the Hon'ble Supreme Court while dealing with the assessee's claim for relief under section 80-0 observed that there can be no doubt at all that under the contract technical services were rendered by the assessee to foreign Government. The learned counsel for the assessee, therefore, contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to making the words ' services ' and ' facilities ' redundant. This is not permissible and as a necessary consequence the word ' sale ' has to be given a wider interpretation as referred to above. We, therefore, hold that relief under section 35B would be available to an assessee even if there is no sale of goods and there is only rendering of services or provisions of facilities. We also hold that the assessee while executing projects outsideIndiais engaged in providing goods and services. 8. As mentioned above, in order to be eligible for weighted deduction the expenditure has to be incurred wholly and exclusively for the purposes specified in the various clauses of sub-clause (b) of section 35B(1). For the year under consideration the clauses that were in operation were (i), (iv) and (vii). Sub-clause (i) dealt with advertisement or publicity. The assessee has not incurred any such expenditure and, therefore, does not claim any relief under that clause. The assessee's plea was that it is entitled to weighted deduction under sub-clauses (iv) and (vii). According to it has offices outsideIndiain connection with the execution of the foreign projects and, therefore, the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the administrative staff, which is not actually employed for execution of the works. According to him, execution of works outsideIndiaby itself promotes the sale of goods, services or facilities and, therefore, such expenditure is also for the promotion of sales. 9.We have given our careful consideration to the respective arguments. Section 35B grants an extra relief and must be interpreted in a realistic manner. The assessee is admittedly executing foreign projects and as held by the Hon'ble Supreme Court in the assessee's own case is entitled to relief under section 80HHB of the Act. Section 80HHB deals with income derived from the business of execution of foreign projects undertaken by an assessee and 25% of the income from such business is exempt subject to certain conditions prescribed in the Act. Section 35B grants weighted deduction in respect of expenditure. The three clauses that now remain in section 35B(1)(b) deal with (i) advertisement and publicity, (ii) maintenance outsideIndiaof a branch, office or agency for the promotion of sale, and (iii) travelling outsideIndiafor promotion of sale. The other clauses that deal with actual expenditure incurred in relation to s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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