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TMI Blog1987 (1) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... es 1962. I find that this rule has not come into force from1-8-1981. A question arises whether this rule is substantive or procedural. Had this rule been procedural it would apply to all pending assessments on that date. I find that this rule provides deduction in income and accordingly rule is not procedural and is substantive rule. In view of this position rule cannot apply to all pending assessments on1-8-1981. Now question arises as to whether assessee will get relief for assessment year 1981-82. I am of the opinion that it is not allowable unless if this rule would have come into force on or before1-4-1981, there may be cases where assessments 1981-82 are taken up and decided prior to1-8-1981. There cannot be any discrimination between assessment framed prior to that date and after this date. In view of this position, assessee's claim for deduction under section 35B is not allowable under rule 6AA for assessment year 1981-82." 3. The disallowance was contested by the assessee and it was argued before the learned AAC that rule 6AA of the Income-tax Rules, 1962 ('the Rules') framed by the CBDT, was no doubt inserted with effect from1-8-1981, but was argued to be retrospective i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief was allowable only after the authorities concerned had prescribed. It means this particular clause was not activated along with the remaining clauses of the section. This is clear because in other clauses, there is no such rider. The operation is straightaway and at once. On this point, the Special Bench of the Tribunal in the case of J. H. & Co. v. Second ITO [1982] 1 SOT 150 (Bom.) is very specific and clear. In fact, the Bench observed as under in the said case: "... is not for us, in administering the law, to rewrite the section or to introduce into it any new kind of expenditure, however analogous it be to the kinds of expenditure specifically referred to in its clause (b). For the same reason, we are convinced that it is also not open to us to breath life into sub-clause (ix) of section 35B(1)(b) which has hitherto not been activated by the rule-making authority, and bring within the ambit of the section, under its cover, other activities not covered by the other sub-clauses. No doubt the Legislature has delegated its authority to the Central Board of Direct Taxes to prescribe 'other activities for the promotion of sale outside India of such goods, services or facilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Biju Patnaik is altogether irrelevant and inapplicable. The said rule is procedural in nature and in fact does not confer any substantive right. Whereas the scope of rule 6AA is such that it confers certain rights and is, therefore, substantive in nature. Moreover, it is not retrospective in operation and, therefore, was only applicable with effect from1-8-1981. 10. In the light of the preceding discussion, we quash the impugned order on this point and, in fact, restore the finding recorded by the learned ITO. 11. In the result, the appeal is allowed. Per Shri V. Dongzathang, Accountant Member--I have carefully perused the order of my learned brother. However, in my view, rule 6AA is procedural and applicable to all the pending cases as on1-8-1981. Section.36B is the main substantive provision which prescribes the qualifying conditions for entitlement to export markets development allowance. The qualifying conditions as per section 35B (1) (a) and (b) are briefly as under: (a) the assessee should be a domestic company or a person other than a company who is a resident; (b) the expenditure should not be in the nature of capital or personal and should be incurred b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions, namely expenditure incurred on or after1-8-1981on such activities as are referred to in rule 6AA. That being not the case the substantive provisions of section 35B will remain applicable to sub-clause (ix) of section 35B(1)(b) and the qualifying activities have to be considered in the light of rule 6AA and deduction has to be allowed in all eligible cases decided on or after 1-8-1981. 4. The appeal accordingly fails and is dismissed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961. A difference of opinion has arisen between us. The matter is, therefore, being placed before the Hon'ble Senior Vice President for being placed before the worthy President for referring the matter on the point of difference to the Third Member for determination, under section 255(4) of the Act. The point of difference is as under: "Whether, on the facts and in the circumstances of the case, weighted deduction under section 35B(1)(b)(ix) of the Act, read with rule 6AA of the Income-tax Rules, 1962, in respect of inspection charges, amounting to Rs. 15,737 was allowable?" THIRD MEMBER ORDER Per Shri Ch. G. Krishnamurthy, Senior Vice president--This is a matter referred to me by the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that inspection was a part of activity incidental to the execution of contract of supply of goods outsideIndiaand therefore, was covered by rule 6AA. Aggrieved by this decision the revenue has filed a further appeal before the Tribunal urging that the AAC was not justified in allowing the weighted deduction under section 35B in respect of inspection charges. 5. That was how the matter reached the Tribunal. After considering the arguments addressed to it both for and against this proposition, the learned Judicial Member held that the rule was substantive in character and not procedural. Therefore, the ITO was justified in negativing the claim of the assessee. For his reasons, he relied upon a decision of the Special Bench of the Tribunal in the case of J. H. & Co. He was of the opinion that any claim pertaining to the period earlier to1-8-1981was not intended to be covered by this rule 6AA. The learned Accountant Member, on the other hand, held that the rule was clarificatory in nature and it was only an extension of the main section 35B, sub-clause (ix), which remained inactive all these years without the proper procedure being prescribed by the Rules because sub-clause (ix) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in operation and would apply to all pending assessments. But these decisions were given in April, May and July 1986 whereas the latest decision was given on22-10-1986. In this decision reliance was placed on the decision in the case of Rajapalayam Mills Ltd., By referring to the facts of Rajapalayam Mills Ltd.'s case the Bench took the view that rule 6AA must be held to be substantive in nature and not procedural. I may also point out that this Bench placed reliance upon another decision of the Special Bench of the Tribunal, namely, in the case of J. H. & Co., in support of its conclusion. In view of the fact that the latest order of the Tribunal passed by the Delhi Benches was based upon a decision given by the Special Bench of the Tribunal, I thought it would be more appropriate and in keeping with judicial discipline to follow that view in preference to the view expressed by the other three benches. I am not entering into the discussion part at all as that exercise was already made by my learned brothers who delivered their judgments and it is idle to embark upon the discussion all over again. 9. Agreeing, therefore, with the view expressed by the Tribunal in the case of Rain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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