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TMI Blog1988 (8) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... he provision regarding deduction of such expenses w.e.f. 1-8-1981 was only of clarificatory nature. It was submitted that the above rule should be applied in all pending assessments and in view of that matter, the order of assessment was not erroneous. 3. The Commissioner of Income-tax considered the submissions and the facts of the case and set aside the assessment to be framed afresh in accordance with law read with the relevant rule because the IAC (Assessment) has failed to bring on record all relevant materials nor has the IAC (Assessment) made proper enquiry in this regard. He directed the IAC (Assessment) to give the assessee reasonable opportunity of being heard. Hence, this appeal before us. 4. We have heard both the sides at length and we have gone through the orders of the authorities below for our consideration. At the outset, it may be mentioned that a similar situation has cropped up in an appeal before us in the case of Assam Co. (India) Ltd. [IT Appeal No. 218 (Gauhati) of 1986] for the assessment year 1981-82, in which a similar order was passed by the Commissioner of Income-tax. In that earlier case, one substantial issue was also involved regarding merger of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de enquiry nor bring correct facts on record. It may be mentioned here that the Assessing Officer has noted in the order, amongst other things, that the assessee claimed export development allowance under section 35B at Rs. 1,42,49,717 @ 1/3rd thereof in respect of the expenditure outside India on account of maintenance of agency and warehouses. He mentioned that it was submitted by the assessee's representative that the expenditure pertaining to maintenance of agency outside India was allowable in terms of clause (iv) of section 35B(1)(b). He also mentioned that in respect of warehouse maintenance charges incurred outside India, it was submitted before the Assessing Officer that the same was admissible under clause (ix) in view of the Notification dated 1-8-1981 issued by the Central Board of Direct Taxes. Thus it could be seen that this was the main plank for the Commissioner of Income-tax to take the above action. The assessee's contention is that the Assessing Officer had applied his mind and examined the facts of the case before allowing the claim as available for the year under consideration. It is also submitted by the assessee's learned counsel that the Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Notification dated 1-8-1981. It is submitted that it has been categorically stated that the rule shall come into force on the date of their publication in the Official Gazette. It is submitted that in such a situation the above rule would be applicable and has to be applied to assessment of a year pending as on 1-8-1981, which is the on possible view of the law in that respect. In support of his contentions, the assessee's learned counsel draws our attention to the decision of the Appellate Tribunal, Madras Bench 'C' in the case of Rayalaseema Passenger Goods Transports (P.) Ltd. v. IAC [1984] 7 ITD 111. In that Madras case, the assessee was allowed depreciation for the assessment year 1980-81 @ 30 per cent on motor vehicles. The assessee applied for rectification so as to allow enhanced depreciation of 40 per cent which was the rate laid down in the Income-tax (Fifth Amendment) Rules, 1980, which was brought into effect from 24-7-1980. The department rejected the claim of the assessee on the ground that enhanced rate is applicable only from 1981-82 onwards. It was also pleaded that at any rate, the issue was debatable. The Appellate Tribunal, Madras Bench held that the princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel before us. It is submitted that the facts of the Madras case related to the assessee's claim for higher rate of depreciation, whereas the facts of the present case were distinguishable, and was in a different context. It is also urged that on the other hand, section 35B provides relief to be given in respect of expenditure incurred by the assessee outside India. It is contended that it is the expenditure which has to be taken as the base for working out relief under section 35B and in such a situation when rule 6AA was brought into effect from 1-8-1981, the said rule cannot be applied to the assessment year, 1981-82 in the case of the assessee where the previous year ended on 30-6-1980 and expenditure have already been incurred. It is repeatedly urged that for matter of relief under section 35B, it is the expenditure which has to be taken as a base and not the date of assessment. Briefly speaking, it is urged that the order of the Commissioner of Income-tax being proper and valid, may be maintained. 9. We have gone through the orders of the authorities below for our consideration along with the rival submissions made by both the sides. It is seen that the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed to the assessee should be only on the basis of the expenditure incurred for those specified purposes, during the year under consideration. It has been specifically provided that export markets development allowance would be allowed in respect of expenditure incurred during the previous year to the extent of one-third time of the amount incurred. Thus, in our view, there is no escape but only to come to the conclusion that the rebate under section 35B would have to be allowed on the basis of the expenditure incurred. In that view of the matter, the date of completion of the assessment would not at all be relevant. The Assessing Officer may have genuinely formed the opinion that the relief was admissible to the assessee in respect of warehousing charges outside India under section 35B in view of the Notification dated 1-8-1981 since he was to complete the assessment after the date, i.e., sometime 1984 for the assessment year 1981-82, in the absence of clear provision which could have been made by the Departmental, Circular or by the authority framing the rules as to which assessment year such rule or amendment would be applicable. But in view of what we have discussed above reba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification in the Gazette, appoint. Similarly, in the instant case before us, the provision of section 35B(1)(b)(ix) provides relief under section 35B in respect of such other activities for promotion of the sale outside India of such goods, services or facilities as may be prescribed. Rule 6AA prescribes what were such other activities which would have to be considered for allowing export markets development allowance under section 35B. But this rule 6AA was inserted by the Income-tax (8th Amendment) Rules, 1981, w.e.f. 1-8-1981, as mentioned earlier. The assessment year involved before us is 1981-82. As indicated earlier, the assessee's accounting year ended on 30-6-1980. 14. In view of the background noted above and keeping the ratio enunciated by the Hon'ble Supreme Court in the decisions mentioned earlier, it cannot be said that the above rule 6AA would be applicable to the assessment year 1981-82 as being the case before us. In that view of the matter, the Commissioner of Income-tax cannot be said to have acted without any jurisdiction or authority in coming to the conclusion that order of assessment was erroneous and prejudicial to the interests of revenue. It may be me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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