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TMI Blog1991 (3) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the present CIT(A) whose order is the subject-matter of the present appeal before us. 4. The assessee-company claimed weighted deduction under section 35B(1)(b)(ix) of the Act in respect of various items. According to the assessee, it had effected sales outside India for which purpose it incurred various expenses. Among other things, one claim was in respect of cost of maintenance of warehouse expenses outside India. The assessee's accounting year ended on 30-6-1980, i.e., relevant to the assessment year 1981-82. The claim of the assessee is based as per the provisions of section 35B(1)(b)(ix) which provides that weighted deduction would be allowed on account of " such other activities for the promotion of sale outside India of such goods, services or facilities as may be prescribed ". Section 35B itself was introduced in the Statute by the Finance Act 1968 with effect from 1-4-1968. But what would be " such other activities " nothing was provided. At a later stage, Rule 6AA of the Income-tax Rules, 1962 was inserted in the Income-tax Rules wherein " such other activities " were enumerated. The said Rule 6AA, among the other things, included ' maintenance outside In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribe such goods, services or facilities and other activities meant for the promotion of sale outside India. The grievance of the assessee was that by sub-clause (ix) the Board has not been given the power to lay down time limit. It was given power to prescribe certain activities for the promotion of sale outside India. It was contended before the CIT(A) that the Board by laying down the date, i.e., 1-8-1981 by the Income-tax (Amendment) Rules, 1981 (Notification dated 1-8-1981) in the Income-tax Rules, 1962 with effect from 1-8-1981, the Govt. has exceeded its power and tried to override substantive section by the rule making power. It was also the case of the assessee that rule making authority cannot prescribe time limit for operation of a substantive provision of the Act unless specifically authorised. Reliance was placed on the various decisions as cited in the impugned order. It was emphatically argued that sub-clause (ix) of section 35B read with Rule 6AA ought to be construed that it has come into existence with effect from 1-4-1968 only. 7. The CIT(A) considering the facts and arguments was of the opinion that subclause (ix) was very clear. He observed that rule maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have allowed the appellant's claim for weighted deduction in respect of expenditure of Rs. 97,59,859 incurred for maintenance outside India of warehouse for the promotion of sale of tea outside India during the previous year ended on 30-6-1980." 9. Besides, reiterating the arguments advanced before the CIT(A), the learned counsel for the assessee vehemently argued that the authorities below went wrong in not allowing the claim of the assessee for weighted deduction. It is stressed that section 35B itself was brought into statute with effect from 1-4-1968. In the said section it is, among other things, provided for weighted deduction in respect of activities mentioned therein including the expenses incurred on account of such other activities for the promotion of sale outside India of such goods or facilities as may be prescribed. It is urged that the assessee, right from 1-4-1968 is entitled to the weighted deduction in respect of such ' other activities ' as well, in addition to other items contemplated by the provisions of section 35B(1)(b)(ix). It is urged that the assessee rightly made this claim before the Assessing Officer who had actually allowed such relief in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us decisions and authorities in order to stress the point. Reference was made to the decision of the Hon'ble Madras High Court in Second ITO v. M.C.T. Trust [1976] 102 ITR 138 and of the Karnataka High Court in South India Paper Mills Ltd. v. Director of Inspection and Audit (Customs Central Excise) [1984] 146 ITR 194. Reference was also made to the decision of the Supreme Court reported in AIR 1972 page 2427. Reliance was also placed on the decision in CIT v. Taj Mahal Hotel [1971] 82 ITR 44 (SC). It was vehemently urged that the CIT(A) in the present case went wrong in rejecting the assessee's claim relying on the decision of the Tribunal on the issue regarding applicability or otherwise of the action of the CIT under section 263. In that order the Tribunal did not decide as to from which date the said rule would come into effect and, therefore, it was totally unjustified for the CIT(A) not to grant the assessee the relief to which it was entitled. In brief, it is urged that if the facts of the case are properly appreciated in their proper perspective, read with the relevant provisions of law, it would be seen that the benefit envisaged in section 35B(1)(b)(ix) of the Act had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence such limitation of period would have to be ignored and in that view of the matter the assessee has rightly claimed the benefit of weighted deduction in the present context. 14. Admittedly, the point involved in the present case is a complex one. As stated earlier, the weighted deduction under section 35B was made available with effect from 1-4-1968 ; but in respect of ' such other activities ' as spelled out by sub-clause (ix) of section 35B(1)(b) will have to be prescribed under the Rule. The Board took time in prescribing " such other activities " which were brought out through rule 6AA and made effective from 1-8-1981 being the date of Notification in the Official Gazette. The grievance of the assessee is that by fixing the date by the rule making authority, in this context, the said authority has exceeded its jurisdiction. The CIT(A) according to the assessee' went wrong in holding that rule making authority has been given power to prescribe such other activities and by implication it has been given power to fix the date of the operation of the said rule. In this connection, it would be helpful to refer to certain decisions which will throw some light on the present is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 ". It was held, on the fact of that case, that the State Govt. could not invest the revenue officers with the powers of Tax Recovery Officers with effect from the prior to the date of the notification and the action taken by the revenue officer was not sustainable. It was noted that the legal fiction that the new definition shall be deemed always to have been substituted could not be extended beyond its legitimate field and could not be construed as conferring power for a retrospective authorisation by the State in the absence of any express provision. It was observed that the exercise of the power by the State Govt. was more an executive than a legislative act. 17. Thus, to accept the contention of the assessee would tantamount to give retrospective effect to the Rule 6AA made by the executive authority. In the aforesaid case it was observed that Parliament can delegate its legislative power within the recognised limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possible to make the same so as to give retrospective operation as it would depend on the language employed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not apply even if the assessment is made after the amendment comes into force. The issue before us is regarding the operation of rule 6AA which in any way cannot be considered as an amendment of any section or rule. In the case of CIT v. Ajax Products Ltd. [1965] 55 ITR 741 (SC) on the facts of that case, it was held by the Hon'ble Supreme Court that if the words of a statute are precise and unambiguous they must be accepted as declaring the express intention of the legislature and a proviso must be considered harmoniously with the main enactment. 22. At the time of hearing, the assessee's counsel placed reliance on the decision of the Karnataka High Court in South India Paper Mills Ltd.'s case wherein the object of Chapter XX II-B of the Income-tax Act, 1961 was dealt with. The object of the said provision was to grant tax credit certificate to certain assessees and by virtue of the said provision the Central Government formed a scheme under which certain time limit was prescribed for the purpose of percentage and application for getting the benefit. It was noted that application presented after expiry of the period prescribed would not be entertained. It was observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icated earlier. Therefore, this Rule would have to be considered as substantive and in such a situation the right cannot be whittled down. It has been held by the Hon'ble Supreme Court in the case of CIT v. S. Teja Singh [1959] 35 ITR 408 that it is a rule of interpretation well settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate, and that a construction which defeats the very objects sought to be achieved by the legislature must, if possible, be avoided. The intention of the legislature, in the present case, was to grant weighted deduction to the assessee in respect of various activities including one prescribed under sub-clause (ix). By introduction of this Rule 6AA such other activities have simply been listed. In our opinion it has to be considered as part of substantive provision and we find no conflict between the provision of above sub-clause (ix) and the Rule 6AA. There is no scope for any other interpretation. In the case of Gursahai Saigal v. CIT [1963] 48 ITR 1 the Hon'ble Supreme Court, on the facts of the case held the provisions in a taxing statute dealing with m ..... 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